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3 Reasons Why There's More Strong Growth Ahead for Five9

Five9 (NASDAQ: FIVN) is one company that has totally bucked the market's recent pullback. The stock is up 29% during the last 30 days -- a time frame in which the S&P 500 fell more than 2%. The stock's sharp rise was mostly driven by the cloud-based contact center specialist's better-than-expected second-quarter results.

In its second-quarter update, Five9 reported 27% year-over-year revenue growth and an 82% increase in non-GAAP earnings per share. In addition, management raised its full-year outlook for its top and bottom lines.

For investors still getting to know Five9, here are three key quotes from its latest earnings call, highlighting why there's more robust growth ahead for the company.

A chalkboard with a green arrow between four white arrows, all trending upward.
A chalkboard with a green arrow between four white arrows, all trending upward.

Image source: Getty Images.

1. Contact centers are no longer cost centers

One narrative Five9 has been pushing recently is that contact centers -- when deployed in a data-driven, scalable, and cloud-based model -- are no longer cost centers for businesses. Instead, they're critical investments.

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"[T]he priority of the contact center is on the rise, as company leaders all over the world recognize that transforming their customer service experience is a necessity," said Five9 CEO Rowan Trollope. "This transformation has fundamentally repositioned the contact center from a cost center into a business differentiator that is worthy of investment."

Companies' increasing adoption of customer-service-oriented technology is an industrywide trend. salesforce.com (NYSE: CRM), for instance, has seen an uptick in its service cloud revenue recently -- and this boils down to the growing importance of customer service to organizations in an e-commerce and direct-to-consumer era. "[I]f you think about how companies differentiate themselves, they do it on service, and they do it specifically around the consumer experience," said Salesforce co-CEO (then a chief operating officer) Keith Block in an earnings call last year.

2. A fast-growing market

Fortunately, these are just the early innings for companies' investments in modernized contact centers. Trollope expects secular tailwinds to persist in the coming years.

"[C]ustomer interactions are absolutely exploding," the CEO said. "If you look at Gartner's data that shows that over the five-year period that we're in, ending by 2022, the interactions in the contact centers are going up by 3.5 times."

3. Strength in enterprise

Driving Five9's top line recently is a growing appetite from the company's large customers, particularly customers with annual recurring revenue greater than $1 million.

During the call, Trollope detailed the strong growth Five9 is seeing in its enterprise customers:

Now, our enterprise business is driving the top line with subscriptions growing at 36% [in the trailing-12-month period]. This enterprise growth is most pronounced with our largest customers paying more than $1 million in annually recurring revenue that now make up over a quarter of our [trailing-12-month] revenue and are the fastest-growing part of our business, with a [compound average growth rate] in the 50s over the last three years.

As companies continue to make their interactions with customers in their contact centers a greater priority, Five9 is positioned perfectly as a platform that provides a real-time routing engine for live interactions. Combine this positioning with the company's proven ability to win over large customers and Five9's growth story is far from over.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Salesforce.com. The Motley Fool owns shares of Five9 and has the following options: long January 2021 $100 calls on Salesforce.com. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.

This article was originally published on Fool.com