When pandemic-related business closures drove millions of consumers online to shop, many shoppers quickly realized how easy it was to switch brands if they had a bad experience. As a result, businesses around the world have quickly realized the critical importance of providing seamless and efficient online customer interactions.

For more than a decade, Five9 (IVFN 0.87%) has helped businesses meet this challenge by improving the way they interact with their customers, whether by phone, email, chat, web or social media.

Born in the Cloud

Founded in 2001, Five9 is a leading global provider and industry pioneer of cloud-based software solutions for contact centers. The company’s software is designed to constantly improve the quality of customer interactions while increasing the productivity of contact center agents.

After a call arrives at a customer’s contact center, Five9’s intelligent software routes the call to the appropriate agent who, after being quickly presented with a screen containing the latest customer information, can efficiently deliver a high-value service tailored to the customer’s needs. specific needs. Over time, data gathered by the software from ongoing customer interactions can help Five9 customers build stronger connections with their customers, which, in turn, increases brand loyalty.

Along with the challenges of building customer loyalty when competitors’ offerings are just a click away, companies are also struggling to manage their contact centers’ rising labor costs – some are even struggling. to attract agents to answer calls in the first place. As the functionality of Five9 software expands, companies are increasingly realizing the potential of Five9 software to alleviate these challenges. Current versions of the software can route calls to interactive virtual agents, eliminating the need for costly human agent interaction in many cases. New software features, such as machine learning and artificial intelligence, are also beginning to help customers monetize their vast amounts of customer data by tailoring sales programs to meet their customers’ specific needs. Management believes that its advancement in these new technologies, which are becoming increasingly valuable to its customers, can provide an important competitive advantage for the company in the coming years.

Exceed expectations

Five9 increased its second-quarter 2022 revenue by 32% to $189 million, beating analysts’ consensus estimate of $180 million. Non-GAAP EPS was $0.34 versus $0.23 in the second quarter of 2021, well above the consensus estimate of $0.18. The company was able to achieve strong earnings growth in the quarter despite initial investments in research and development (R&D) and global infrastructure expansion.

These substantial investments in 2022 should accelerate earnings growth in 2023 and beyond. Management currently believes it has the building blocks in place to achieve $2.4 billion in revenue and 23% adjusted EBITDA in 2026.

A big customer wins

Five9 is growing rapidly in the massive contact center software market, but management believes it has just begun tapping into a total addressable market of $58 billion. Five9 is outpacing industry growth, in large part by winning new, increasingly large enterprise customers, many of whom have likely chosen Five9 because of its growing functionality, reliability, improved cloud security, and growing number of partnerships. cloud software integration.

Notable wins in the first half of 2022 include a contract extension with a leading European insurance company, two new large financial services companies, a healthcare conglomerate with an expected ARR of $40 million and an extension of major contract with a package delivery services company that is now expected to net Five9 nearly $50 million in ARR.

Volatility creates opportunities for patient investors

Like most cloud software stocks, Five9 shares will likely continue to be more volatile than the average stock and are best suited to investors with long-term horizons. But if management can deliver on its forecast for robust sales growth and margin expansion in the massive contact center software market, patient investors could be handsomely rewarded over the next few years. Additionally, as the company expands its global reach, it increases its chances of attracting a premium buyout offer from a larger cloud software company in the area of ​​customer relationship management (CRM).