EX-99.1 2 d90841dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

inContact Reports Third Quarter 2015 Financial Results

 

    Record software segment revenues of $36.7 million in Q3, up 40% year-over-year

 

    Consolidated revenue in Q3 of $56.1 million, up 27% year-over-year

 

    Record 137 contracts in Q3, record software bookings up 36% year-over-year

 

    Annualized Recurring Revenues up 51%

 

    Raised 2015 guidance for revenues, EPS and EBITDA

SALT LAKE CITY – October 29, 2015 – inContact, Inc. (NASDAQ: SAAS), the leading provider of cloud contact center software and contact center optimization tools, today reported record financial results for the third quarter ended September 30, 2015.

Said Paul Jarman, inContact CEO, “In Q3, we enjoyed one of our strongest quarters in all areas of the business. Our software revenues grew 40% and new business activity was at record levels. Importantly, we demonstrated significant operating leverage with a substantial increase in gross margin and a 50% improvement in operating margin. Adjusted EBITDA of $4.0 million increased three-fold over the prior year and almost equaled the amount for the entire first half of 2015. We continue to win the majority of competitive opportunities and further distanced ourselves from the competition with the advanced cloud features in our latest release.”

Continued Jarman, “During the quarter, we closed 137 total contracts, including 92 new logo customers and 45 expansion deals with existing customers. Software bookings were 36% above year ago results. The relationships with new partners, including RingCentral, ThinkingPhones and Jive Communications, along with near record results from our carrier partners and direct sales force, enables us to increase guidance for full year results. We will continue to lead the cloud contact center industry in 2016.”

Revenue

Software segment revenue totaled $36.7 million for the quarter ended September 30, 2015, an increase of 40% from $26.3 million in Q3 2014. Combined Software and Software-related Network connectivity revenue for the quarter ended September 30, 2015 was $54.4 million, an increase of 30% from $41.7 million for the quarter ended September 30, 2014. Approximately 91% of Network connectivity segment revenues were derived from contracts with customers utilizing our contact center software.

Consolidated revenue for the quarter ended September 30, 2015 was $56.1 million versus $44.2 million for the same period in 2014, an increase of 27%.

For the nine months ended September 30, 2015, Software segment revenue totaled $103.2 million, an increase of 46% from $70.5 million for 2014. For the nine months ended September 30, 2015, Network connectivity segment revenue totaled $57.3 million, an increase of 10% from $51.9 million for the same period in 2014.

As of September 2015 our Annualized Monthly Recurring Software Revenue was $145.5 million, an increase of 51% from $96.6 million as of September 2014.

Gross Margin

Software segment gross margin for the quarter ended September 30, 2015 was 60% versus 54% for the same period in 2014. Non-GAAP Software segment gross margin which represents the elimination of amortization of acquired intangible assets and stock-based compensation was 64% for the third quarter of 2015, versus 59% in the third quarter of 2014. Third quarter 2015 Network connectivity segment gross margin was 37% versus 37% for the same period in 2014.

Consolidated gross margin percentage was 52% in the third quarter of 2015 compared to 47% for the same period in 2014. Non-GAAP consolidated gross margin which represents the elimination of amortization of acquired intangible assets and stock-based compensation was 54% for the third quarter 2015 compared to 50% for the same period in 2014.

Operating Expenses

Operating expenses for the third quarter of 2015 were $32.9 million or 59% of total revenue versus $27.4 million or 62% of total revenue during the same period in 2014. Non-GAAP operating expenses which represents the elimination of amortization of acquired intangible assets and stock-based compensation for the third quarter of 2015 were $30.8 million or 55% of total revenue versus $24.7 million or 56% of total revenue during the same period in 2014.

Adjusted EBITDA

Adjusted EBITDA for the third quarter of 2015 was $4.0 million versus $993,000 during the same period in 2014. Adjusted EBITDA is a non-GAAP measure management believes provides important insight into our operating results (see reconciliation of non-GAAP measures below).

Net Loss

Net loss for the quarter ended September 30, 2015 was $5.7 million, or ($0.09) per basic and diluted share, as compared to net loss of $6.7 million or ($0.11) per basic and diluted share for the same period in 2014.

Increased Guidance for 2015

We expect software segment revenues to be between $142 million and $143 million for the full year, up from a range of $135 million to $138 million. In 2015, we anticipate total revenues to be between $218 million and $220 million for the full year, up from a range of $211 million to $214 million. This would represent 41% to 42% growth for software revenues. We expect a net loss of ($0.41) to ($0.43) per share on a GAAP basis, and $(0.19) to ($0.20) per share on a non-GAAP basis. We expect adjusted EBITDA of $11.5 million to $12.0 million, up from a range of $8.0 million to $9.0 million.


Preliminary Outlook for 2016

For the full year of 2016, the Company expects software revenues of $175 million to $182 million and consolidated revenues of $254 million to $262 million.

CONFERENCE CALL INFORMATION

We will host a conference call to discuss our third quarter 2015 financial results later today at 4:30 p.m. Eastern time (1:30 p.m. Pacific).

Dial-In Number: 1-866-952-1906

International: + 1-785-424-1825

Conference ID#: INCONTACT

An audio file of the call will be available after October 29, 2015 on the inContact Investor Relations website at http://investor.incontact.com, in the Webcasts and Presentations section. A replay of the call will be available via telephone after 7:30 p.m. Eastern time today and until November 5, 2015.

Toll-free replay number: 1-877-870-5176

International replay number: + 1-858-384-5517

Replay Pin Number: 1233208

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

All statements included in this press release, other than statements or characterizations of historical fact, are forward-looking statements. These forward-looking statements are based on inContact’s current expectations, estimates and projections about inContact’s industry, management’s beliefs, and certain assumptions made by management, all of which are subject to change. Forward-looking statements can often be identified by words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,” “will,” “should,” “would,” “could,” “potential,” “continue,” “ongoing,” similar expressions, and variations or negatives of these words and include, but are not limited to, statements regarding projected results of operations and management’s future strategic plans. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement.

The risks and uncertainties referred to above include, but are not limited to, risks associated with inContact’s business model; our ability to develop or acquire, and gain market acceptance for new products, including our new sales and marketing and voice automation products, in a cost-effective and timely manner; the gain or loss of key customers; competitive pressures; its ability to expand operations; fluctuations in its earnings as a result of the impact of stock-based compensation expense; interruptions or delays in our hosting operations; breaches of our security measures; its ability to protect our intellectual property from infringement, and to avoid infringing on the intellectual property rights of third parties; and its ability to expand, retain and motivate our employees and manage its growth. Further information on potential factors that could affect our financial results is included in inContact’s annual report on Form 10-K, quarterly reports of Form 10-Q, and in other filings with the Securities and Exchange Commission. The forward-looking statements in this release speak only as of the date they are made. inContact undertakes no obligation to revise or update publicly any forward-looking statement for any reason.


INCONTACT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS - (Unaudited)

(in thousands)

 

     September 30,      December 31,  
     2015      2014  
ASSETS      

Current assets:

     

Cash and cash equivalents

   $ 31,164       $ 32,414   

Restricted cash

     81         81   

Investments

     75,980         —     

Accounts and other receivables, net of allowance for uncollectible accounts of $1,957 and $1,816, respectively

     39,690         28,126   

Other current assets

     9,088         6,979   
  

 

 

    

 

 

 

Total current assets

     156,003         67,600   

Property and equipment, net

     40,183         35,077   

Intangible assets, net

     20,992         24,768   

Goodwill

     39,247         39,247   

Other assets

     2,087         2,078   
  

 

 

    

 

 

 

Total assets

   $ 258,512       $ 168,770   
  

 

 

    

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY      

Current liabilities:

     

Trade accounts payable

   $ 13,611       $ 11,031   

Accrued liabilities

     14,096         13,259   

Accrued commissions

     4,195         3,407   

Current portion of deferred revenue

     12,313         8,439   

Current portion of debt and capital lease obligations

     —           4,095   
  

 

 

    

 

 

 

Total current liabilities

     44,215         40,231   

Long-term debt and capital lease obligations

     80,940         18,543   

Deferred rent

     5         28   

Deferred tax liability

     795         795   

Deferred revenue

     6,121         5,749   
  

 

 

    

 

 

 

Total liabilities

     132,076         65,346   

Total stockholders’ equity

     126,436         103,424   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 258,512       $ 168,770   
  

 

 

    

 

 

 


INCONTACT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(in thousands, except per share data)

 

     Three Months     Nine Months  
     Ended September 30,     Ended September 30,  
     2015     2014     2015     2014  

Net revenue:

        

Software

   $ 36,709      $ 26,286      $ 103,227      $ 70,493   

Network connectivity

     19,369        17,909        57,260        51,867   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total net revenue

     56,078        44,195        160,487        122,360   
  

 

 

   

 

 

   

 

 

   

 

 

 

Costs of revenue:

        

Software

     14,815        12,018        42,872        30,486   

Network connectivity

     12,278        11,316        36,072        33,009   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total costs of revenue

     27,093        23,334        78,944        63,495   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     28,985        20,861        81,543        58,865   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Selling and marketing

     17,810        13,541        49,549        36,602   

Research and development

     7,328        6,316        21,021        15,554   

General and administrative

     7,750        7,500        25,699        20,525   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     32,888        27,357        96,269        72,681   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (3,903     (6,496     (14,726     (13,816

Other income (expense):

        

Interest expense

     (1,738     (83     (3,940     (278

Interest income

     125        —          183        —     

Other income (expense)

     1        1        1        (148
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes

     (5,515     (6,578     (18,482     (14,242

Income tax benefit (expense)

     (163     (106     (474     9,262   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (5,678   $ (6,684   $ (18,956   $ (4,980
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per common share:

        

Basic and diluted

   $ (0.09   $ (0.11   $ (0.31   $ (0.09

Weighted average common shares outstanding:

        

Basic and diluted

     61,688        60,429        61,407        58,448   


INCONTACT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (Unaudited)

(in thousands)

 

     Nine Months Ended September 30,  
     2015     2014  

Cash flows from operating activities:

    

Net loss

   $ (18,956   $ (4,980

Adjustments to reconcile net loss to net cash from operating activities:

    

Depreciation of property and equipment

     7,601        5,447   

Amortization of software development costs

     4,876        4,300   

Amortization of intangible assets

     3,776        2,316   

Amortization of deferred debt issuance costs

     391        24   

Stock-based compensation

     6,510        5,790   

Loss on disposal of property and equipment

     —          626   

Interest accretion of debt discount

     1,843        —     

Amortization of investment premium

     148        —     

Loss on disposal of developed software

     148        —     

Write-off of contingent liability

     —          (146

Deferred income taxes

     —          (9,368

Changes in operating assets and liabilities, net of business acquisitions:

    

Accounts and other receivables, net

     (11,564     (3,843

Other current assets

     (2,109     (1,793

Other non-current assets

     11        (333

Trade accounts payable

     2,467        1,875   

Accrued liabilities

     1,021        (238

Accrued commissions

     787        (122

Other long-term liabilities

     (220     (145

Deferred revenue

     4,246        3,309   
  

 

 

   

 

 

 

Net cash provided by operating activities

     976        2,719   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Sales and maturities of investments

     13,716        —     

Purchases of investments

     (89,879     —     

Capitalized software development costs

     (7,457     (8,052

Purchases of property and equipment

     (10,162     (10,920

Acquisition of a business, net of cash acquired

     —          (11,992

Payments made for deposits

     (19     (32
  

 

 

   

 

 

 

Net cash used in investing activities

     (93,801     (30,996
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from exercise of options

     2,603        2,009   

Proceeds from sale of stock under employee stock purchase plan

     1,249        566   

Borrowings under term loan

     —          1,000   

Payment of debt financing fees

     —          (45

Principal payments under debt and capital lease obligations

     (11,824     (3,154

Purchase of treasury stock

     (643     (162

Payments under the revolving credit agreement

     (11,000     10,000   

Proceeds from issuance of convertible notes, net

     111,190        —     
  

 

 

   

 

 

 

Net cash provided by financing activities

     91,575        10,214   
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (1,250     (18,063
  

 

 

   

 

 

 

Cash and cash equivalents at the beginning of the period

     32,414        49,148   
  

 

 

   

 

 

 

Cash and cash equivalents at the end of the period

   $ 31,164      $ 31,085   
  

 

 

   

 

 

 


SEGMENT REPORTING

We operate under two business segments: Software and Network connectivity (formerly “Telecom”). The Software segment includes all revenue related to the delivery of our software applications, plus the associated professional services and setup fees and revenue related to quarterly minimum purchase commitments through July 2014, from a related party reseller. The Network connectivity segment includes all voice and data long distance services provided to customers.

For segment reporting, we classify operating expenses as either “direct” or “indirect.” Direct expense refers to costs attributable solely to either selling and marketing efforts or research and development efforts. Indirect expense refers to costs that management considers to be overhead in running the business. Management evaluates expenditures for both selling and marketing and research and development efforts at the segment level without the allocation of overhead expenses, such as rent, utilities and depreciation on property and equipment.

Operating segment revenues and profitability for the three months ended September 30, 2015 and 2014 were as follows (in thousands):

 

     Three Months Ended September 30, 2015     Three Months Ended September 30, 2014  
           Network                 Network        
     Software     Connectivity     Consolidated     Software     Connectivity     Consolidated  

Net revenue

   $ 36,709      $ 19,369      $ 56,078      $ 26,286      $ 17,909      $ 44,195   

Costs of revenue

     14,815        12,278        27,093        12,018        11,316        23,334   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     21,894        7,091        28,985        14,268        6,593        20,861   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     60     37     52     54     37     47

Operating expenses:

            

Direct selling and marketing

     16,075        895        16,970        12,087        856        12,943   

Direct research and development

     6,866        —          6,866        5,961        —          5,961   

Indirect

     7,943        1,109        9,052        7,615        838        8,453   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

   $ (8,990   $ 5,087      $ (3,903   $ (11,395   $ 4,899      $ (6,496
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

RECONCILIATION of NON-GAAP MEASURES:

“Adjusted EBITDA” is Earnings Before deductions for Interest, Taxes, Depreciation and Amortization and Stock-Based Compensation. The “Non-GAAP” measures represent the elimination of amortization of acquired intangible assets and stock-based compensation. Neither are measures of financial performance under generally accepted accounting principles (GAAP). The Adjusted EBITDA and the Non-GAAP measures are provided for the use of the reader in understanding our operating results and are not prepared in accordance with, nor does it serve as an alternative to GAAP measures and may be materially different from similar measures used by other companies. While not a substitute for information prepared in accordance with GAAP, management believes that this information is helpful for investors to more easily understand our operating financial performance. Management also believes these measures may better enable an investor to form views of our potential financial performance in the future. These measures have limitations as analytical tools, and investors should not consider these measures in isolation or as a substitute for analysis of our results prepared in accordance with GAAP.

Reconciliation of Adjusted EBITDA to Net loss applicable to

common stockholders as it is presented on the Condensed Consolidated

Statements of Operations for inContact, Inc.

(in thousands - unaudited)

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
     2015      2014      2015      2014  

Net loss

   $ (5,678    $ (6,684    $ (18,956    $ (4,980

Depreciation and amortization

     5,585         4,651         16,253         11,917   

Stock-based compensation

     2,300         2,837         6,510         5,790   

Interest income and expense, net

     1,613         83         3,757         278   

Income tax expense

     163         106         474         (9,262
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 3,983       $ 993       $ 8,038       $ 3,743   
  

 

 

    

 

 

    

 

 

    

 

 

 


Reconciliation of Consolidated Gross Profit and Margin to Consolidated Non-GAAP Gross Profit and Margin

(in thousands - unaudited)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2015     2014     2015     2014  

Consolidated gross profit

   $ 28,985      $ 20,861      $ 81,543      $ 58,865   

Consolidated gross margin

     52     47     51     48

Add back:

        

Amortization of acquired intangibles

     1,157        1,106        3,717        2,110   

Stock-based compensation

     272        217        810        599   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP gross profit

   $ 30,414      $ 22,184      $ 86,070      $ 61,574   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP gross margin

     54     50     54     50

Reconciliation of Software Segment Gross Profit and Margin to Non-GAAP Software Segment Gross Profit

(in thousands - unaudited)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2015     2014     2015     2014  

Software segment gross profit

   $ 21,894      $ 14,268      $ 60,355      $ 40,007   

Software gross margin

     60     54     58     57

Add back:

        

Amortization of acquired intangibles

     1,157        1,106        3,717        2,110   

Stock-based compensation

     266        214        790        484   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP software gross profit

   $ 23,317      $ 15,588      $ 64,862      $ 42,601   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP software gross margin

     64     59     63     60

Reconciliation of Consolidated Operating Expenses to Non-GAAP Consolidated Operating Expenses

(in thousands - unaudited)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2015     2014     2015     2014  

Consolidated operating expenses

   $ 32,888      $ 27,357      $ 96,269      $ 72,681   

Operating expenses as a % of total revenue

     59     62     60     59

Subtract:

        

Amortization of acquired intangibles

     (19     (20     (59     (60

Stock-based compensation

     (2,029     (2,621     (5,700     (5,191
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP operating expenses

   $ 30,840      $ 24,716      $ 90,510      $ 67,430   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP consolidated operating expenses, as a % of total revenue

     55     56     56     55

About inContact

inContact (NASDAQ: SAAS) is the cloud contact center software leader, making it easier and affordable for organizations around the globe to create stand-out customer experiences while at the same time meeting their key business metrics. inContact continuously innovates in the cloud and is the only provider to offer a complete cloud customer interaction platform that is purpose built for enterprise and government organizations who operate in multiple divisions, locations and global regions. Named as Market Leader in the 2015 Ovum Decision Matrix and winner of the 2014 CRM Magazine Rising Star Award, inContact has deployed over 2,200 cloud contact center instances. To learn more, visit www.incontact.com.

inContact® is the registered trademark of inContact, Inc.

CONTACT: Investor Contact: Edward Keaney, Market Street Partners, 1-415-445-3238, ekeaney@marketstreetpartners.com, or General Contact: Cheryl Andrus, inContact, Director Corporate Communications, 1-801-320-3646, cheryl.andrus@incontact.com