While large-cap stocks are generally safer -- or at least less volatile -- than their small-cap counterparts, that doesn't mean investors have to compromise on quality or growth prospects just to invest in smaller companies. Two great examples of small, high-quality companies growing at rapid rates are Five9 (NASDAQ:FIVN) and Telaria (NYSE:TLRA).
Both of these companies possess a range of attractive characteristics, including fast-growing revenue, impressive profit margins, and powerful value propositions for their customers.
Five9, a $2.8 billion company, is a software-as-a-service company providing leading cloud-based contact center solutions. The company's contact center platform gives companies a secure and scalable contact center solution that integrates with an extensive ecosystem of partners.
In the company's first quarter, revenue rose 27% year over year to $74.5 million. Highlighting the compelling economics of its business model, Five9's non-GAAP (adjusted) gross margin expanded from 62.3% in the first quarter of 2018 to 63.4%. The company saw a bottom-line improvement as well, with non-GAAP net income in Q1 coming in at $10 million, up from $4.5 million in the year-ago quarter.
"As customer experience becomes an increasingly important spend category for IT, we see our role as a trusted partner to larger enterprises continuing to accelerate," said Five9 CEO Rowan Trollope in the company's first-quarter update.
For the company's second quarter, management said it expected revenue to rise about 19% year over year. In addition, Five9 guided for non-GAAP net income between $7 million and $8 million for the period.
The company is scheduled to report its second-quarter results after market close on Wednesday, July 31.
Telaria provides a software platform for video publishers like Hulu to optimize and monetize their video advertising inventory. Focused on connected TV and programmatic advertising, the company is positioned in the center of one of the fastest-growing areas of digital advertising. Telaria is significantly smaller than Five9, with a market capitalization of just $360 million.
The ad tech specialist's first-quarter revenue rose 42% year over year to $13.6 million. This marked an acceleration compared to 31% revenue growth in Q4. The company's impressive top-line growth is being driven by primarily by surging connected TV revenue, or revenue made from connected TV ads that are monetized through its platform. Telaria's connected TV revenue increased 169% year over year to $5.2 million in Q1, accounting for 38% of revenue, up from 33% of revenue in Q4.
In its first quarter, Telaria boasted a lucrative gross profit margin of 82%. But it's not profitable yet; first-quarter adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were negative $2.4 million. But this is an improvement from negative $3.3 million in the first quarter of 2018.
For its second quarter, management forecast revenue to be between $15.5 million and $16.5 million, representing 25% to 33% year-over-year growth. In addition, management guided for second-quarter adjusted EBITDA between negative $1 million and breakeven. This compares to adjusted EBITDA of negative $3.3 million in the first quarter of 2018.
Telaria will report its second-quarter results before market open on Tuesday, Aug. 6.