"FIVN reported 4Q18 revenue/non-GAAP EPS of $72.3M/$0.23 compared with our estimate of $66.3M/$0.13 and Street’s $66.5M/$0.14. Revenue growth accelerated to 30.6% from 30.4% last quarter. CFO of $15.5M handily beat our $6.0M and Street’s $12.4M.
Positives: Enterprise growth, net retention rate, seat count, and guidance. (1) Enterprise revenue constituted 77% of total LTM revenue and grew 36% y/y. FIVN currently has 40 customers generating over $1M and annualized ARR doubled in the last two years.
(2) Dollar based net retention rate accelerated to 103% up from 102% last quarter.
(3) Average concurrent seat count grew to 105.3K which represents an acceleration with 28% y/y growth above the 19-23% growth range in last four years.
(4) Management guided 2019 revenue/non-GAAP EPS in the range of $298.5-$301.5M/$0.58-$0.62 as compared to Street’s $295.7M/$0.58.
Issues: Growth coming at a cost. Although the EPS guidance is better than expected (due to higher than expected revenue), reconciling from net income to operating margins implies a guidance of ~11-12%. This is a compression from the 14.2% delivered in FY18. Investments in R&D and S&M are expected to pressure the operating margins. Management, however, expects to deliver 20%+ adjusted EBITDA margins exiting 2019.
Increasing Dec-2019 price target to $58. Our new price target uses 10.5x EV/Sales up from our 8x multiple previously. The significant beat and raise has us expanding the multiple as we see room for upside to estimates in 2019."
~JPM
Note: FIVN doesn’t not sit on top of either the TWLO or AMZN stack for call centers, so if you’re competing with either of those two, you might be much more likely to use Five9.