ZACKSยท2025-06-23 15:05Core Insights - Artificial intelligence is significantly transforming the software industry, with BigBear.ai and Five9 leading the charge in different sectors [2][3] - BigBear.ai focuses on AI for government and defense applications, while Five9 specializes in cloud contact center software, integrating generative AI for commercial enterprises [2][3] Company Overview: BigBear.ai - BigBear.ai is undergoing a strategic pivot towards sustainable growth under new CEO Kevin McAleenan, leveraging its expertise in national security and critical infrastructure [5] - The company reported a backlog growth of 30% year-over-year, reaching $385 million, indicating strong customer confidence, particularly with new contracts from the Department of Defense [6] - In Q1 2025, BigBear.ai reported revenue of $34.8 million, reflecting only 5% year-over-year growth, and an adjusted EBITDA loss of $7 million due to increased R&D spending and delayed federal funding [8] Company Overview: Five9 - Five9 is a mature enterprise SaaS company benefiting from the generative AI trend in customer experience, with its "Genius" platform providing essential AI capabilities for large brands [9] - In Q1 2025, Five9 reported revenues of $279.7 million, a 13.2% increase year-over-year, with subscription revenue making up 80% of total revenue and growing by 14% [10] - The company achieved record free cash flow of $34.9 million and an adjusted EBITDA margin of 18.8%, indicating strong operational execution [11] Market Position and Performance - BigBear.ai's stock has increased by 13% over the past three months but is down 10.1% year-to-date, while Five9's shares have decreased by 13% over the past three months and 34% year-to-date [14] - Five9's stock is currently trading at a lower valuation compared to BigBear.ai, with a price-to-sales ratio of 1.71, which is considered low for a software company with double-digit growth [18] Financial Estimates and Outlook - Five9's earnings estimates have been trending upward, with a projected EPS growth of 11.7% from 2024 to 2025, while BigBear.ai is expected to report a loss of $0.41 per share, narrower than the previous year's loss [20] - Five9 has reaffirmed its full-year revenue guidance of $1.14 billion and raised its EPS guidance, indicating strong operational leverage and growth potential [13] Investment Considerations - BigBear.ai presents a speculative investment opportunity with potential for explosive gains if it can convert its backlog into profitable growth, but it faces significant risks due to its reliance on government contracts [24] - Five9 offers a more established growth narrative with improving margins and a strong market position, making it a more favorable investment option with a Zacks Rank 2 (Buy) [24]