Five9, Inc. EBITDA jumped on 566% and EBITDA Margin increased on 5.4 pp from 1.3% to 6.7%
02/19/2019 • About Five9, Inc. (
$FIVN) • By InTwits
Five9, Inc. reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Five9, Inc. is a fast growth stock: 2018 revenue growth was 28.7%, 5 year revenue CAGR was 25.1% at 2018 ROIC 3.2%
- EBITDA Margin is expanding: 6.7% in 2018 vs. 1.3% in 2017 vs. -28.2% in 2014
- Five9, Inc. spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for 2014-2018 is 8.0%. Average EBITDA Margin for the same period was -2.5%. In 2018 SBC/Revenue was even higher: 11.1%
- Five9, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.5%. At the same time it's a lot of higher than industry average of 13.3%.
- CAPEX is quite volatile: $9m in 2018, $3m in 2017, $1m in 2016, $1m in 2015, $1m in 2014
- In the last 5 years the company invested considerably less than D&A: $15m vs. $41m
- The company has potentially unprofitable business model: ROIC is 3.2%
- It operates with high leverage: Net Debt/EBITDA is 7.3x while industry average is -2.2x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue surged on 28.7%. Revenue growth showed acceleration in 18Q4 - it increased 30.6% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 3.9 pp from 18.2% to 22.1% in 2018. EBITDA Margin stuck to a growing trend at 8.2 pp per annum in the last 5 years.
Gross Margin increased slightly on 1.1 pp from 58.5% to 59.6% in 2018. Gross Margin stuck to a growing trend at 3.0 pp per annum in 2014-2018. SG&A as a % of Revenue decreased on 4.7 pp from 47.8% to 43.1% in 2018. SG&A as a % of Revenue followed a declining trend at -3.9 pp per annum in 2014-2018. Stock Based Compensation (SBC) as a % of Revenue increased on 3.4 pp from 7.7% to 11.1% in 2018. During 2014-2018 SBC as a % of Revenue bottomed in 2016 at 5.9% and was growing since that time.
Net Income margin increased on 4.4 pp from -4.5% to -0.086% in 2018. Net Income margin followed a growing trend at 8.9 pp per annum in 2014-2018.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 3.6% in 2018. CAPEX/Revenue increased on 2.7 pp from 0.87% in 2015 to 3.6% in 2018. For the last three years the average CAPEX/Revenue was 1.9%. To fuel its fast growth Five9, Inc. invested a large share of EBITDA (53.6%) to CAPEX. During the last 5 years CAPEX as a % of Revenue bottomed in 2016 at 0.70% and was growing since that time.
Accounts receivable as a % of Revenue showed almost no change in 2018. Accounts payable as a % of Revenue increased slightly on 1.6 pp from 5.2% to 6.7% in 2018.
Return on investment
The company operates at low but positive ROIC (3.2%) and negative ROE (-0.2%). ROIC increased on 9.9 pp from -6.7% to 3.2% in 2018. ROE jumped on 23.0 pp from -23.2% to -0.23% in 2018. ROIC grew at 14.7 pp per annum in 2014-2018.
Leverage (Debt)
Debt level is 7.3x Net Debt / EBITDA and 12.0x Debt / EBITDA. Net Debt / EBITDA jumped on 15.9x from -8.6x to 7.3x in 2018. Debt jumped on 345% while cash jumped on 18.8%.
Five9, Inc. has questionable short term financial stability: Interest coverage ratio (ICR) is only 0.7x. Five9, Inc. has no short term refinancing risk: cash is higher than short term debt (1,232.3%).
Average interest expence charged on company's debt was 4.9% in 2018.
Management team
Five9, Inc.'s CEO Rowan M Trollope is a founder and has spent 1 year with the company. CEO total compensation was
$18,327,867 in 2018 which included
$746,166 salary. Five9, Inc.'s CFO is Barry Zwarenstein. Barry Zwarenstein has 1 year tenure at the company.
Insider ownership is 3.0%. Insider ownership didn't change in 2018.
The company has 983 employees. The number of employees surged on 14.3%. Average revenue per employee in 2018 was
$262,120 and it surged on 12.6%.
Financial and operational results
FY ended 12/31/2018
Five9, Inc. ($FIVN) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 103.1 | 128.9 | 162.1 | 200.2 | 257.7 | 28.7% |
| Gross Profit | 48.4 | 69.4 | 95.2 | 117.1 | 153.6 | 31.2% |
| SG&A | 61.9 | 67.9 | 77.8 | 95.7 | 111.0 | 16.0% |
| EBITDA | -29.1 | -13.8 | 1.8 | 2.6 | 17.3 | 566.3% |
| EBIT | -35.5 | -21.2 | -6.5 | -5.7 | 7.0 | |
| Interest expence | 4.2 | 4.7 | 4.2 | 3.5 | 10.2 | 195.2% |
| Tax | 0.1 | 0.1 | 0.1 | 0.3 | 0.3 | 11.9% |
| Net Income | -37.8 | -25.8 | -11.9 | -9.0 | -0.2 | |
| Stock Based Compensation | 6.8 | 7.7 | 9.6 | 15.3 | 28.5 | 85.6% |
Balance Sheet
|
|---|
| Cash | 58.3 | 58.5 | 58.1 | 68.9 | 81.9 | 18.8% |
| Accounts Receivable | 8.3 | 10.6 | 13.9 | 19.0 | 24.8 | 30.2% |
| Accounts Payable | 4.2 | 2.6 | 3.4 | 4.3 | 7.0 | 63.3% |
| Short Term Debt | 8.0 | 24.7 | 7.0 | 7.0 | 6.6 | -4.9% |
| Long Term Debt | 39.7 | 21.9 | 38.8 | 39.8 | 201.3 | 406.3% |
Cash flow
|
|---|
| Capex | 1.0 | 1.1 | 1.1 | 2.7 | 9.3 | 249.5% |
Ratios
|
|---|
| Revenue growth | 22.5% | 25.0% | 25.8% | 23.5% | 28.7% | |
| EBITDA growth | 21.6% | -52.7% | -113.4% | 40.4% | 566.3% | |
|
|---|
| Gross Margin | 47.0% | 53.8% | 58.7% | 58.5% | 59.6% | 1.1% |
| EBITDA Margin | -28.2% | -10.7% | 1.1% | 1.3% | 6.7% | 5.4% |
| EBIT Margin | -34.5% | -16.4% | -4.0% | -2.9% | 2.7% | 5.6% |
| SG&A, % of revenue | 60.0% | 52.7% | 48.0% | 47.8% | 43.1% | -4.7% |
| SBC, % of revenue | 6.5% | 6.0% | 5.9% | 7.7% | 11.1% | 3.4% |
| Net Income Margin | -36.6% | -20.0% | -7.3% | -4.5% | -0.1% | 4.4% |
| CAPEX, % of revenue | 1.0% | 0.9% | 0.7% | 1.3% | 3.6% | 2.3% |
|
|---|
| ROIC | -60.6% | -25.8% | -8.7% | -6.7% | 3.2% | 9.9% |
| ROE | | -76.0% | -41.9% | -23.2% | -0.2% | 23.0% |
| Net Debt/EBITDA | | | -6.7x | -8.6x | 7.3x | 15.9x |
| Interest coverage ratio (ICR) | | | | | 0.7x |
| Interest expence / Average debt | 8.7% | 10.0% | 9.1% | 7.5% | 4.9% | -2.6% |
People
|
|---|
| Insider ownership | 3.0% | 3.0% | 3.0% | 3.0% | 3.0% | 0.0% |
| Employees | 630 | 692 | 780 | 860 | 983 | 14.3% |
| Revenue/Employee, th. $ | 164 | 186 | 208 | 233 | 262 | 12.6% |
Five9, Inc. ($FIVN) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 59 | 61 | 65 | 72 | | 25.3% | 28.1% | 30.4% | 30.6% |
| EBITDA | 2 | 3 | 3 | 9 | | | | -7.4% | 309.0% |
| Net Income | -1 | -2 | -1 | 4 | | | | -241.2% | |
Balance Sheet
|
|---|
| Cash | 81 | 166 | 80 | 82 | | 42.9% | 190.8% | 25.7% | 18.8% |
| Short Term Debt | 7 | 7 | 7 | 7 | | 5.1% | 9.6% | 5.6% | -4.9% |
| Long Term Debt | 40 | 198 | 200 | 201 | | 2.6% | 409.2% | 406.6% | 406.3% |
Ratios
|
|---|
| Gross Margin | 58.1% | 59.4% | 59.9% | 60.8% | | 0.5% | 1.9% | 0.8% | 1.2% |
| EBITDA Margin | 3.7% | 4.3% | 5.1% | 12.6% | | 8.7% | 6.2% | -2.1% | 8.6% |
| Net Income Margin | -1.0% | -3.3% | -2.0% | 5.2% | | 10.1% | 5.1% | -3.8% | 6.3% |
Peers in Application Software
Below you can find Five9, Inc. benchmarking vs. other companies in Application Software industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| nFusz Inc ($FUSZ) | | | | | 433.3% |
| CloudCommerce Inc ($CLWD) | | -38.1% | 247.6% | 40.9% | 301.1% |
| Seven Stars Cloud Group, Inc. ($SSC) | | 134.7% | 663.8% | 310.3% | 161.7% |
| Aurora Mobile Limited ($JG) | | | | 304.9% | 150.8% |
| Intelligent Systems Corporation ($INS) | | 14.2% | 71.0% | 12.2% | 119.0% |
| |
|---|
| Median (151 companies) | -43.3% | 13.5% | 13.6% | 14.8% | 15.2% |
|---|
| Five9, Inc. ($FIVN) | | 25.0% | 25.8% | 23.5% | 28.7% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Skkynet Cloud Systems Inc ($SKKY) | 99.7% | 97.4% | 98.0% | 97.6% | 96.5% |
| hopTo Inc ($HPTO) | 91.8% | 87.8% | 95.9% | 98.2% | 95.4% |
| Aware, Inc. ($AWRE) | 75.4% | 87.2% | 90.3% | 94.6% | 92.3% |
| Alteryx, Inc. ($AYX) | 77.5% | 80.5% | 81.3% | 83.4% | 91.0% |
| Aspen Technology, Inc. ($AZPN) | 86.5% | 88.7% | 89.7% | 90.2% | 89.9% |
| |
|---|
| Median (150 companies) | 63.4% | 61.9% | 64.2% | 64.6% | 66.1% |
|---|
| Five9, Inc. ($FIVN) | 47.0% | 53.8% | 58.7% | 58.5% | 59.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Aspen Technology, Inc. ($AZPN) | 34.5% | 42.2% | 46.0% | 45.2% | 43.3% |
| ANSYS, Inc. ($ANSS) | 45.9% | 45.8% | 45.1% | 41.9% | 41.4% |
| Paycom Software, Inc. ($PAYC) | 15.1% | 19.5% | 35.1% | 34.4% | 35.9% |
| j2 Global, Inc. ($JCOM) | 41.6% | 40.6% | 41.7% | 36.5% | 35.7% |
| Adobe Inc. ($ADBE) | 17.5% | 25.9% | 31.2% | 34.2% | 35.3% |
| |
|---|
| Median (152 companies) | -10.1% | -9.5% | -5.3% | -4.2% | -3.3% |
|---|
| Five9, Inc. ($FIVN) | -28.2% | -10.7% | 1.1% | 1.3% | 6.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| TimefireVR Inc ($TFVR) | 0.0% | 350.5% | 4.3% | | 1,021.9% |
| MGT Capital Investments Inc ($MGTI) | 0.0% | 36.5% | 221.4% | 129.8% | 344.5% |
| Integrated Ventures Inc ($INTV) | | | | | 199.9% |
| ShotSpotter, Inc. ($SSTI) | | 18.3% | 28.9% | 27.1% | 24.3% |
| Ellie Mae, Inc. ($ELLI) | 12.3% | 20.6% | 16.7% | 21.1% | 19.4% |
| |
|---|
| Median (153 companies) | 2.8% | 2.7% | 3.0% | 2.3% | 2.4% |
|---|
| Five9, Inc. ($FIVN) | 1.0% | 0.9% | 0.7% | 1.3% | 3.6% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| InsPro Technologies Corp ($ITCC) | -558.9% | | | | 127.4% |
| Manhattan Associates, Inc. ($MANH) | 64.8% | 78.7% | 99.3% | 102.5% | 80.9% |
| Intuit Inc. ($INTU) | 34.2% | 23.7% | 52.1% | 72.6% | 66.8% |
| Aspen Technology, Inc. ($AZPN) | 133.4% | | | | 58.1% |
| Paycom Software, Inc. ($PAYC) | 16.7% | 30.5% | 75.4% | 51.1% | 47.5% |
| |
|---|
| Median (179 companies) | -14.2% | -11.2% | -9.8% | -11.8% | -10.4% |
|---|
| Five9, Inc. ($FIVN) | -60.6% | -25.8% | -8.7% | -6.7% | 3.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Upland Software, Inc. ($UPLD) | | | 16.4x | 115.6x | 16.7x |
| Nuance Communications, Inc. ($NUAN) | 7.9x | 5.7x | 5.3x | 7.1x | 15.2x |
| Asure Software Inc ($ASUR) | 3.4x | 4.5x | 3.6x | 9.5x | 14.5x |
| SS&C Technologies Holdings, Inc. ($SSNC) | 1.7x | 7.3x | 4.6x | 3.1x | 8.5x |
| Avaya Holdings Corp. ($AVYA) | | | | | 7.4x |
| |
|---|
| Median (69 companies) | -1.4x | -1.0x | -0.9x | -0.8x | -0.7x |
|---|
| Five9, Inc. ($FIVN) | | | -6.7x | -8.6x | 7.3x |
