Contact: Scott Denne
Call-center software maker Five9 made its IPO filing public Monday, with financials that fit the pattern of other SaaS companies: strong revenue growth, steep losses. Five9 posted $84m in 2013 revenue, up 32% from 2012.
There was a cost to that growth. The firm ended the year with $17m in cash, after raising $45m in debt and equity financing in 2013. Its sales and marketing expenses jumped 67%, double the rate that its revenue grew, and pushed operational expenses up to the highest level in the three years disclosed in its prospectus. Five9 recorded a $28m net loss last year, up from $17m in 2012 and $7m in 2011.
None of that makes Five9 an outlier, however. Many other SaaS vendors, including RingCentral, ServiceNow and Workday, spend a larger portion of their revenue on sales and marketing. None are trending toward profitability.
Losses haven’t hurt valuations for those companies, and they likely won’t impede Five9. Because of its pure cloud portfolio, we expect Five9’s enterprise valuation to be a few ticks higher than competitors Interactive Intelligence (4.8x trailing revenue) and inContact (3.5x), both of which still sell legacy on-premises software in addition to cloud offerings.
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