I am just learning about Five9’s (ticker FIVN and publicly traded) epic cash management. Actually, this might be one of the best trades I’ve seen from a company with a market cap at $3 billion or less.

Let me explain how they’re making $40+ million a year just in interest. If you are a trader, or investor, you will no doubt find this incredibly impressive.

First, let’s go back a few years to when interest rates were essentially under 1% after Covid. They immediately took out two convertible notes when interest rates were low—$650 million in 2020 at just 0.5% and an upsized note in late 2023 and finalized in early 2024 of $747.5 million at 1.0%. They borrowed north of a billion for an average interest rate of LESS than 1% while their market cap was essentially not far from that. But it gets better.

They sat on the money, methodically, making prudent investments and strategic plays, while upgrading their platform. Many companies that took out loans of this size did not hold on to the money nearly as prudently or intelligently. For those that did, they are now reaping the reward with interest rates being as high as they are.

What I mean is, soon enough, as we all know today, interest rates started to rise. That’s when Five9 managed to plow a bunch of it into various bonds and notes earning what appears to be 4% or more. That means they are effectively arbitraging interest rates, borrowing at next to nothing and earning a massive spread. Based on rough math, they’re pulling in about $50 million annually in interest while paying just $9 million on their debt, netting them around $40 million per year just for smart treasury management.

Take this screenshot from their latest earnings report showing their aggressive marketable investments:

I decided to go searching to learn what they’re doing with their $640 million sitting in marketable investments and what they might do if they put the other $362 million in cold cash to work. Here’s what I found:

“U.S. treasury securities, municipal bonds, commercial paper, corporate bonds, certificates of deposit, and money market funds. Our investment policy is focused on the preservation of capital and supporting our liquidity needs. Under this policy, we invest in highly rated securities while limiting the amount of credit exposure to any one issuer other than the U.S. government. We do not invest in financial instruments for trading or speculative purposes, nor do we use leveraged financial instruments.”

This is true mastery of cash management and treasury operations.

Wow!

And wow again!

I will be searching for more companies who have managed to play the markets as good as this.