Why One Fund Has an $8.5 Million Bet on Five9 Despite a 50% One-Year Stock Collapse
Key Points
New York City-based S Squared Technology added 165,000 shares of Five9 in the third quarter.
As of quarter-end, the fund reported holding 350,000 FIVN shares valued at $8.5 million.
Five9 now accounts for 3.2% of AUM, which places it outside the fund's top five holdings.
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New York City-based S Squared Technology increased its holdings in Five9 (NASDAQ:FIVN) by 165,000 shares in the third quarter, reflecting an estimated $3.6 million position value change, according to a November 13 SEC filing.
What Happened
According to a filing with the Securities and Exchange Commission dated November 13, S Squared Technology increased its stake in Five9 (NASDAQ:FIVN) by 165,000 shares over the third quarter. The addition brought the fund’s total holdings in the company to 350,000 shares, worth $8.5 million at quarter’s end.
What Else to Know
The fund's Five9 position now represents 3.2% of 13F assets under management.
Top holdings after the filing:
- NASDAQ: LSCC: $25.4 million (9.7% of AUM)
- NASDAQ: KRYS: $19.3 million (7.3% of AUM)
- NASDAQ: SYM: $18.9 million (7.2% of AUM)
- NASDAQ: KTOS: $18.2 million (6.9% of AUM)
- NYSE: PRLB: $15.6 million (5.9% of AUM)
As of Friday, Five9 shares were priced at $20.72, down 50% over the past year and well underperforming the S&P 500's 16% gain in the same period.
Company Overview
| Metric | Value |
|---|---|
| Price (as of Friday) | $20.72 |
| Market Capitalization | $1.6 billion |
| Revenue (TTM) | $1.1 billion |
| Net Income (TTM) | $31.3 million |
Company Snapshot
- Five9 provides a cloud-based contact center platform offering voice, video, chat, email, social media, and API-driven customer engagement solutions.
- The company serves enterprise clients across industries, including banking, financial services, healthcare, technology, education, and business process outsourcing.
- It operates a subscription-based model, with clients paying for access to its virtual contact center suite and related services.
Five9, Inc. is a leading provider of cloud software for contact centers, enabling enterprises to manage omnichannel customer interactions efficiently. The company leverages advanced technologies, including natural language processing and automatic speech recognition, to enhance the customer experience. Its scalable platform and focus on innovation position Five9 as a key player in the cloud-based contact center market.
Foolish Take
S Squared's move likely signals conviction in Five9's operating fundamentals and not necessarily its stock-market momentum -- at least not over the past year. The stock has fallen roughly 90% from its 2021 highs, and it's still down about 50% over the past year, but Five9's latest quarter supports a thesis that its business has stabilized and future cash flows might be mispriced.
Revenue rose 8% year over year to a record $285.8 million, while Enterprise AI revenue surged 41%. Profitability also improved meaningfully, with adjusted EBITDA margins expanding to 25.1% from 19.8% a year earlier. Operating cash flow reached a quarterly record of $59 million, reinforcing that growth is no longer coming at the expense of discipline. Management also authorized a $150 million share repurchase program, a notable signal given the company’s history of stock-based compensation.
Within the portfolio, this position sits below larger bets in semiconductor, defense, and aerospace names, making it more like a calculated software allocation rather than a core holding. For long-term investors, the takeaway is straightforward: Five9 isn't priced for growth perfection, but its improving margins, rising AI mix, and strengthening cash generation suggest the business may be far healthier than the stock chart implies.
Glossary
13F assets under management (AUM): The total value of securities reported by institutional investment managers in their quarterly SEC Form 13F filings.
Position value change: The difference in a fund's investment value in a specific security after buying or selling shares.
Stake: The total number of shares or percentage ownership a fund holds in a particular company.
Top holdings: The largest investments in a fund's portfolio, typically ranked by market value.
Omnichannel: An approach that integrates multiple communication channels (voice, chat, email, etc.) for seamless customer interactions.
Automatic speech recognition: Technology that converts spoken language into text, enabling computers to understand and process human speech.
Natural language processing: Artificial intelligence technology that enables computers to interpret and respond to human language.
Business process outsourcing: Contracting specific business tasks, such as customer service, to external service providers.
API-driven: Refers to software or platforms that use Application Programming Interfaces (APIs) to enable integration and automation.
TTM: The 12-month period ending with the most recent quarterly report.
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Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Five9, Kratos Defense & Security Solutions, Krystal Biotech, and Symbotic. The Motley Fool recommends Proto Labs. The Motley Fool has a disclosure policy.
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