Five9 Buys AI Startup Level AI for $325 Million in Cash
Five9 agreed to buy Level AI for $325 million in cash, almost half its cash pile, and its stock fell more than 23% late. Deal terms, results and next steps.
Five9 Inc., which sells cloud software for customer service centers, agreed to buy Level AI, a startup that builds artificial intelligence tools for contact centers, for $325 million in cash. Five9 announced the deal alongside its third-quarter results and said it expects to close it in the fourth quarter, subject to customary closing conditions.
Shareholders reacted badly. Five9 stock fell more than 23% in late trading after the announcement, according to SiliconANGLE, which pointed to the price tag: the cash outlay equals almost half of the $738 million in cash and marketable investments Five9 held at the end of the quarter.
What Level AI makes
Level AI’s platform listens to calls between customer service agents and customers, gives agents guidance while the call is happening, and scores and analyzes the conversations afterward. Managers can use those results to coach agents. The startup also builds AI agents that handle simpler customer questions and routine back-office tasks on their own, leaving harder cases to people.
In a blog post on the deal, Five9 said Level AI’s applications already run at enterprise customers and handle more than one billion customer interactions a year.
How Five9 plans to use the startup
Five9 said it will keep selling Level AI’s tools as standalone products. That covers companies that still run their contact centers on their own servers and companies that use cloud platforms from other vendors. Five9 also plans to plug the tools into its own Genius CX Platform.
Chief executive Amit Mathradas said the purchase strengthens Five9’s competitive position, widens the set of customers it can serve and adds AI talent. Level AI founder and CEO Ashish Nagar said joining Five9 will put the company’s applications and models in front of thousands of new contact centers worldwide while it keeps serving current customers.
Five9’s quarter beat forecasts by a small margin
The deal came with results that were slightly ahead of Wall Street’s expectations. Five9 reported adjusted earnings of 82 cents per share on revenue of $323.3 million, compared with forecasts of 80 cents per share and $318.3 million in sales.
Its outlook was weaker. For the current quarter, the company expects earnings of 88 cents to 92 cents per share on sales of $328 million to $334 million. Analysts had been looking for 99 cents per share and $330.7 million in revenue. For the full year, Five9 guided to earnings of $3.17 to $3.21 per share on sales of $1.27 billion, while Wall Street expects $3.26 per share on similar revenue.
The full-year guidance leaves out any contribution from Level AI, so the outlook does not yet reflect the acquisition.
What it means for shareholders, employees and customers
For Five9 shareholders, the main change is on the balance sheet. Paying $325 million in cash uses up a large share of the company’s reserves instead of issuing new stock, so existing holders are not diluted, but the company will have far less cash on hand after closing. SiliconANGLE noted that the value of the purchase depends on how fast Five9 can fold Level AI’s technology into its products.
For Level AI’s customers, Five9 has said the standalone products will continue, including for businesses that do not use Five9’s platform. Five9 did not disclose plans for Level AI’s staff beyond saying the deal adds AI talent, and it did not say whether any regulatory approvals beyond customary conditions are required.
What happens next
Five9 expects the acquisition to close in the fourth quarter once customary closing conditions are met. The company has not given a specific closing date.
Source: SiliconANGLE
