4. Five9 Inc. (NASDAQ:FIVN)
Share Price as of January 5: $41.04
Average Upside Potential as of January 5: 21.83%
Number of Hedge Fund Holders: 29
Five9 Inc. (NASDAQ:FIVN) provides cloud contact center software (CCaaS) and improves customer engagement through its Intelligent CX Platform. This platform supports seamless communication across various channels, including phone, email, and social media. The company serves 2,500+ customers and collaborates with 1,400+ partners worldwide.
Its core growth engine is its AI-powered CX platform called the Five9 Genius AI, which transforms how businesses interact with customers. In Q3 2024, AI products contributed to over 20% of enterprise new logo ACV bookings, which represent the total annual contract value of new business deals signed with new enterprise customers. Furthermore, the ARR of new logo deals incorporating AI surpassed those without AI by 5x. Overall, AI bookings surged over 50% year-over-year.
Five9 Inc. (NASDAQ:FIVN) has introduced its AI Blueprint program. This program provides a framework for businesses to utilize AI effectively within their CX strategies. By working closely with customers, its AI experts develop customized roadmaps for specific needs and objectives. Additionally, its consumption-based pricing model allows experimentation and innovation, where customers can scale their AI investments based on their needs.
Despite near-term challenges, including macroeconomic headwinds and potential AI disruption, Brown Capital Management Mid Company Fund believes Five9’s leadership in cloud-based contact center software, strong AI product suite, and long-term growth potential make it a promising investment. Here’s what the Fund stated in its first quarter 2024 investor letter:
“Five9, Inc. (NASDAQ:FIVN) is a leader in cloud-based contact center software, offering a comprehensive omnichannel solution that seamlessly incorporates inbound and outbound calling with email, chat, SMS and social media. With the growth of e-commerce, consumers are increasingly opting for digital interactions over physical visits, driving the need for world-class contact-center software solutions. These systems effectively become a virtual front door for customers, serving as indispensable, mission-critical gateways for customer engagement and support. Five9’s cloud-native platform is superior to traditional, on-premise legacy systems, offering lower costs, faster innovation and support for remote-working needs. These advantages are expected to significantly increase cloud adoption in the future, pushing it well above the current level of approximately 20%.
The company reported fourth quarter revenue results that were only modestly ahead of consensus expectations, with disappointing revenue-growth guidance for the first quarter of 2024. Management cited the macroeconomic impact of lower demand for services from the installed base, driven by headwinds within the consumer discretionary vertical, which is the company’s third-largest customer segment. In addition, there are ongoing concerns that new artificial intelligence (AI) technologies could disintermediate contact-center software and shrink the market for the company’s offering. However, AI also offers a significant opportunity for the company, a leader with eight currently marketed AI products that are providing a pricing uplift of as much as 2-3x. In addition, to fully leverage AI’s advantages, customers must first adopt cloud-based solutions, which should accelerate the shift to the cloud, benefiting Five9. The company has seen particularly strong adoption of AI solutions with larger enterprises, helping it expand beyond its earlier success with small and medium-sized customers. Despite the near-term headwinds, Five9 should have a healthy runway for durable double-digit long-term growth driven by industry-leading technology and market-share gains from legacy incumbents.”
