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Summary

  • FIVN is a provider of cloud software for contact centers, plans to raise $100.0 million in its upcoming IPO.
  • FIVN will offer 10.0 million shares at an expected price range of $9-$11 per share, hoping to command a market value of $515 million.
  • We suggest investors consider buying into FIVN’s IPO; the company’s increasing revenues and current favorable market for tech stocks could carry FIVN high.

Five9 Inc (NASDAQ:FIVN), a provider of cloud software for contact centers, plans to raise $100.0 million in its upcoming IPO.

The San Ramon, California-based firm will offer 10.0 million shares at an expected price range of $9-$11 per share. If the IPO can reach the midpoint of that range at $10 per share, FIVN will command a market value of $515 million.

FIVN filed on March 3, 2014.

Lead Underwriters: Barclays Capital Inc, BofA Merrill Lynch, JP Morgan Securities LLC

Underwriter: Canaccord Genuity Inc, Needham & Company LLC, Pacific Crest Securities LLC

A Birds-Eye View of This Cloud Software Company

FIVN provides cloud software for contact centers, designed to improve customer engagement, while lowering costs and complexity. The firm's Virtual Contact Center (VCC) cloud platform offers a suite of applications for service, sale and marketing functions. The VCC platform matches customers with appropriate agents and provides those agents with real-time customer data.

FIVN provides its services through a SaaS model, with recurring subscriptions, based on number of agent seats and minutes of usage of the VCC platform. FIVN's solution can quickly be deployed anywhere, requiring only a computer, headset and broadband connection, and clients can quickly adjust the number of contact center agent seats to respond to business needs.

Valuation

FIVN offers the following figures in its S-1 balance sheet for the year ended December 31, 2013:

Revenue: $84,132,000.00

Net Loss: ($31,314,000.00)

Total Assets: $56,278,000.00

Total Liabilities: $59,246,000.00

Stockholders' Equity: ($2,968,000.00)

FIVN has experienced significant revenue growth over the past several years. For the years ended December 31, 2011, 2012 and 2013, revenues were $43.2 million, $63.8 million and $84.1 million, respectively. Over the same periods, the firm incurred net losses of $7.9 million, $19.3 million and $31.3 million, respectively.

Competitors

FIVN competes with providers of on-premise contact center technology such as Avaya Inc, Cisco Systems Inc (NASDAQ:CSCO), Aspect Software Inc, and Genesys Telecommunications Laboratories Inc, as well as firms that have expanded their offerings to include cloud-based software, such inContact Inc (NASDAQ:SAAS) and LiveOps Inc. Some of these competitors have significantly greater access to financial and technical resources than FIVN.

Strong Management

Michael Burkland has served as FIVN's CEO since 2008 and as President since 2012. He has also served as the firm's Chairman since February 2014. Mr. Burkland previously worked with the Interim CEO Network, serving as an interim CEO and leading the firm's strategic advisory practice. He also previously served as CEO of Omniva Policy Systems Inc and as CEO of Eventus Software Inc. Mr. Burkland holds a B.A. and an M.B.A. from the University of California at Berkeley.

Investors Should Be Keen On FIVN

We believe investors should consider buying into FIVN's IPO and we rate this IPO a BUY.

Despite losses, FIVN has been able to nearly double its revenue from calendar 2011 to calendar 2013, and this growth, along with rallying tech stocks, may be enough to carry FIVN to success.

It should be noted that the compensation packages awarded to the firm's executives--$2.3 million for CEO Michael Burkland and $1.9 million for Executive Vice President of Products Moni Manor in 2013--seem excessive. While this does not change our opinion above, it's worthy of attention.

Source: Favorable Tech Market Could Lift Five9 IPO Sky-High