On Wednesday, Five9, Inc (NASDAQ:FIVN), a leading provider of cloud contact center software, confirmed its plan to reduce its global workforce by approximately 7%. The cost of this workforce reduction is estimated to be between $12 million and $15 million. These expenses are expected to be primarily recognized in the third and fourth quarters of 2024, with the reduction process projected to be substantially complete by year-end.
The company's announcement on Tuesday indicated that the reduction in force (RiF) would be fairly broad-based, with the majority of the impact felt outside of quota-carrying representatives.
This strategic move is aimed at limiting the impact on Five9's growth potential. Despite the workforce reduction, the company's previous guidance, released alongside second-quarter results, accounted for the projected cost savings. However, the expected costs of the RiF were not included in the projected GAAP earnings per share (EPS) guidance.
Needham has reaffirmed its Buy rating on Five9's stock, maintaining the price target of $48.00. In light of the recent announcement, the firm has revised its model, updating the estimated GAAP EPS for the third quarter to a loss of $0.21 per share, down from a loss of $0.04 per share. Additionally, the full-year GAAP EPS estimate has been adjusted to a loss of $0.45 per share from the previously estimated loss of $0.27 per share.
The company expects the workforce reduction to be executed by the end of 2024, with the intention of streamlining operations and improving financial efficiency. As the market processes this information, Five9's stock continues to be watched closely by investors and analysts alike. The reiteration of the Buy rating by Needham suggests confidence in the company's long-term strategy and growth trajectory despite the short-term costs associated with the workforce reduction.
In other recent news, Five9 Inc . has made significant strides in its financial performance and strategic growth initiatives. The company reported an annual revenue run rate exceeding $1 billion in Q2, with a robust adjusted EBITDA margin of 17% contributing to a strong operating cash flow of $126 million. Despite these achievements, the company has revised its annual revenue guidance downward by 3.8% due to customer budget constraints.
Five9 has also announced the acquisition of Acqueon, a firm specializing in proactive outbound omnichannel customer engagement, in a bid to bolster its growth and expand its AI offerings. BTIG, a notable analyst firm, has maintained a Buy rating on Five9, highlighting the company's strategic positioning within the digital shift in customer engagement practices.
Despite a challenging bookings quarter, Five9 remains optimistic about its long-term potential in the AI market. The company is focusing on managing expenses and improving profitability in the second half of the year, with initiatives like FedRAMP and expansion into India anticipated to improve gross margins.
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