inContact Reports Fourth Quarter and Full Year 2015 Financial Results

- Record Software segment revenues of $40.5 million in Q4, up 34% year-over-year

- Consolidated revenue in Q4 of $61.5 million, up 24% year-over-year

- Full year 2015 adjusted EBITDA of over $13.8 million, up 173% year-over-year

- 144 contracts in Q4 and software bookings up 35% year-over-year

- Annualized Recurring Revenues up 42% year-over-year

- Q4 non-GAAP operating income of $1.3 million

16 Feb, 2016, 16:01 ET from inContact, Inc.

SALT LAKE CITY, Feb. 16, 2016 /PRNewswire/ -- inContact, Inc. (NASDAQ: SAAS), the leading provider of cloud contact center software and contact center optimization tools, today reported record financial results for the fourth quarter and full year ended December 31, 2015.

Said Paul Jarman, inContact CEO, "In Q4, we enjoyed one of our strongest quarters in all areas of the business. Our software revenues grew 34% and new business activity was at record levels. Importantly, we demonstrated significant operating leverage with a substantial increase in operating margin. Adjusted EBITDA of $5.8 million for the quarter increased nearly 4-fold over the prior year. For the full year, adjusted EBITDA increased 173% to over $13.8 million. 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 144 total contracts, including 93 new logo customers and 51 expansion deals with existing customers. Software bookings were 35% above year ago results. Strong results from partners and an outstanding contribution from our direct sales force, enables us to increase guidance for 2016 results. We will continue to lead the cloud contact center industry in 2016."   

Revenue

Software segment revenue totaled $40.5 million for the quarter ended December 31, 2015, an increase of 34% from $30.3 million in Q4 2014. Combined Software and Software-related Network connectivity revenue for the quarter ended December 31, 2015 was $60.1 million, an increase of 28% from $47.1 million for the quarter ended December 31, 2014. Approximately 97% of Network connectivity segment revenues were derived from contracts with customers utilizing our contact center software. Consolidated revenue for the quarter ended December 31, 2015 was $61.5 million versus $49.4 million for the same period in 2014, an increase of 24%.

For the year ended December 31, 2015, Software segment revenue totaled $143.7 million, an increase of 43% from $100.8 million for same period in 2014. For the year December 31, 2015, Network connectivity segment revenue totaled $78.3 million, an increase of 10% from $71.0 million for the same period in 2014.  Consolidated revenue for the year ended December 31, 2015 was $222.0 million versus $171.8 million for the same period in 2014, an increase of 29%.

As of December 2015 our Annualized Monthly Recurring Software Revenue was $159.4 million, an increase of 42% from $112.6 million as of December 2014.

Gross Margin

Software segment gross margin for the quarter ended December 31, 2015 was 60% versus 59% 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 fourth quarter of 2015, versus 63% in the fourth quarter of 2014 (see reconciliation of non-GAAP measures below). Fourth quarter 2015 Network connectivity segment gross margin was 40% versus 36% for the same period in 2014.

Consolidated gross margin percentage was 53% in the fourth quarter of 2015 compared to 50% 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 55% for the fourth quarter 2015 compared to 53% for the same period in 2014 (see reconciliation of non-GAAP measures below).

Operating Expenses

Operating expenses for the fourth quarter of 2015 were $34.6 million or 56% of total revenue versus $30.2 million or 61% 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 fourth quarter of 2015 were $32.8 million or 53% of total revenue versus $28.8 million or 58% of total revenue during the same period in 2014 (see reconciliation of non-GAAP measures below).

Adjusted EBITDA

Adjusted EBITDA for the fourth quarter of 2015 was $5.8 million versus $1.2 million during the same period in 2014. For the year, adjusted EBITDA was over $13.8 million, up 173% year-over-year. 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 December 31, 2015 was $3.8 million, or ($0.06) per basic and diluted share, as compared to net loss of $5.6 million or ($0.09) per basic and diluted share for the same period in 2014.  Net loss for the year ended December 31, 2015 was $22.8 million, or ($0.37) per basic and diluted share, as compared to net loss of $10.6 million or ($0.18) per basic and diluted share for the same period in 2014.  Net loss for the year ended December 31, 2014 was benefitted by a $9.4 million tax credit, associated with the Uptivity acquisition.  Non-GAAP net loss for the quarter ended December 31, 2015 was $384 thousand, or ($0.01) per basic and diluted share, as compared to non-GAAP net loss of $2.9 million or ($0.05) per basic and diluted share for the same period in 2014.  Non-GAAP net loss for the year ended December 31, 2015 was $9.1 million, or ($0.15) per basic and diluted share.  Excluding the $9.4 million tax benefit, non-GAAP net loss for 2014 was $9.3 million or ($0.16) per basic and diluted share (see reconciliation of non-GAAP measures below). 

Acquisitions

During the last month we closed two technology acquisitions. We acquired intellectual property (including 5 patents) around advanced analytics technology from Attensity, Inc., a leading provider of text based analytics. A group of Attensity engineers from their Salt Lake City office have joined our team. We also acquired AC2, a New Jersey-based company focused on workforce optimization technology, which included another 5 patents to continue to augment our workforce optimization solutions. A small group of AC2 employees are joining our workforce optimization group in Columbus, Ohio.

In both cases, the companies were focused primarily on building new technologies to take to market. They have proven their solutions with mid-market and enterprise customers and built the technology in a multitenant cloud environment. We expect these acquisitions to make a meaningful contribution to revenues in 2017 and beyond, and we will be integrating this software into our product offerings and training our sales teams on these solutions throughout the year. 

"These acquisitions add new talent, open additional revenue opportunities and enhance our competitive differentiation with cutting edge technology," continued Jarman. "Our ability to simultaneously produce revenue growth and bottom-line performance is evidenced in the 2015 results and is foremost in our plans for 2016. inContact continues to deliver market leading growth, continuous innovation in customer experience technology, and increasing non-GAAP operating results."

Guidance for 2016

In 2016, we expect Software segment revenues to be between $177.0 million and $183.0 million for the full year. This would represent 23% to 27% growth for software revenues. In 2016, we anticipate total revenues to be between $257.0 million and $263.0 million for the full year. We expect a net loss of ($0.35) to ($0.28) per share on a GAAP basis, and ($0.06) to ($0.09) per share on a non-GAAP basis. We expect adjusted EBITDA of $19.5 million to $21.0 million, and expect to be non-GAAP operating income profitable in 2016. This guidance reflects the expected net impact from our two recent acquisitions.

CONFERENCE CALL INFORMATION

We will host a conference call to discuss our fourth 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 February 16, 2016 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 February 23, 2016.

Toll-free replay number: 1-877-870-5176
International replay number: + 1-858-384-5517
Replay Pin Number: 1233209

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

(in thousands)






December 31,


December 31,


2015


2014

ASSETS

(unaudited)



Current assets:




Cash and cash equivalents

$          29,050


$          32,414

Restricted cash

81


81

Investments

75,109


-

Accounts and other receivables, net of allowance for uncollectible accounts of $2,555 and $1,816, respectively

 

37,185


 

28,126

Other current assets

9,243


6,979

Total current assets

150,668


67,600





Property and equipment, net

42,569


35,077

Intangible assets, net

19,232


24,768

Goodwill

39,247


39,247

Other assets

2,421


2,078

Total assets

$        254,137


$        168,770





LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Trade accounts payable

$          11,607


$          11,031

Accrued liabilities

12,828


13,259

Accrued commissions

4,615


3,407

Current portion of deferred revenue

11,530


8,439

Current portion of debt and capital lease obligations

-


4,095

Total current liabilities

40,580


40,231





Long-term debt and capital lease obligations

81,985


18,543

Deferred rent

3


28

Deferred tax liability

230


795

Deferred revenue

6,082


5,749

Total liabilities

128,880


65,346





Total stockholders' equity

125,257


103,424

Total liabilities and stockholders' equity

$        254,137


$        168,770

 

INCONTACT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)










Three Months Ended


Year Ended


December 31,


December 31,


2015


2014


2015


2014


 (unaudited) 




(unaudited)



Net revenue:








Software

$            40,492


$ 30,312


$       143,719


$ 100,805

Network connectivity

21,008


19,112


78,268


70,979

Total net revenue

61,500


49,424


221,987


171,784

Costs of revenue:








Software

16,321


12,505


59,193


42,991

Network connectivity

12,680


12,144


48,752


45,153

Total costs of revenue

29,001


24,649


107,945


88,144

Gross profit

32,499


24,775


114,042


83,640

Operating expenses:








Selling and marketing

16,832


14,573


66,381


51,175

Research and development

8,286


6,825


29,307


22,379

General and administrative

9,526


8,833


35,225


29,358

Total operating expenses

34,644


30,231


130,913


102,912

Loss from operations

(2,145)


(5,456)


(16,871)


(19,272)

Other income (expense):








Interest expense

(1,761)


(87)


(5,701)


(365)

Interest income

136


-


319


-

Other income (expense)

(3)


151


(2)


3

Total other income (expense)

(1,628)


64


(5,384)


(362)

Loss before income taxes

(3,773)


(5,392)


(22,255)


(19,634)

Income tax benefit (expense)

(55)


(191)


(529)


9,071

Net loss

$            (3,828)


$ (5,583)


$       (22,784)


$ (10,563)









Net loss per common share:








Basic and diluted

$              (0.06)


$   (0.09)


$           (0.37)


$     (0.18)









Weighted average common shares outstanding:








Basic and diluted

61,867


60,626


61,521


58,997

 

INCONTACT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)






Year Ended December 31, 


2015


2014


(unaudited)



Cash flows from operating activities:




Net loss

$       (22,784)


$ (10,563)

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




Depreciation of property and equipment

10,423


7,730

Amortization of software development costs

6,595


5,834

Amortization of intangible assets

4,953


3,651

Amortization of deferred debt issuance costs

488


30

Stock-based compensation

8,777


7,142

Loss on disposal of property and equipment

55


687

Interest accretion

2,791


3

Amortization of investment premium

467


-

Write-off of contingent liability

-


(146)

Write-off of intangibles

583


-

Deferred income taxes

(565)


(9,368)

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




Accounts and other receivables, net

(9,140)


(8,702)

Other current assets

(2,182)


(1,255)

Other non-current assets

(324)


(506)

Trade accounts payable

581


1,236

Accrued liabilities

(237)


3,221

Accrued commissions

1,209


588

Other long-term liabilities

(234)


(236)

Deferred revenue

3,424


5,899





Net cash provided by operating activities

4,880


5,245

Cash flows from investing activities:




Sales and maturities of available for sale investments

37,382


-

Purchase of available for sale investments

(113,039)


-

Capitalized software development costs

(10,083)


(11,010)

Purchases of property and equipment

(14,488)


(13,273)

Acquisition of a business, net of cash acquired

-


(13,059)

Payments made for deposits

(19)


(32)





Net cash used in investing activities

(100,247)


(37,374)

Cash flows from financing activities:




Proceeds from exercise of options

3,176


2,313

Proceeds from sale of stock under employee stock purchase plan

1,558


826

Borrowings under term loans

-


6,000

Payment of debt financing fees

-


(47)

Principal payments under debt and capital lease obligations

(11,824)


(4,112)

Purchase of treasury stock

(1,097)


(585)

Borrowings under the revolving credit agreement

-


21,000

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

92,003


15,395

Net decrease in cash and cash equivalents

(3,364)


(16,734)

Cash and cash equivalents at the beginning of the year

32,414


49,148

Cash and cash equivalents at the end of the year

$         29,050


$  32,414

 

SEGMENT REPORTING

We operate under two business segments: Software and Network connectivity. 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 and twelve months ended December 31, 2015 and 2014 were as follows (in thousands):

 


Quarter Ended December 31, 2015


Quarter Ended December 31, 2014




Network






Network




Software


Connectivity 


Consolidated


Software


Connectivity 


Consolidated


(unaudited)


(unaudited)


(unaudited)







Net revenue

$         40,492


$         21,008


$         61,500


$   30,312


$         19,112


$         49,424

Costs of revenue

16,321


12,680


29,001


12,505


12,144


24,649

Gross profit

24,171


8,328


32,499


17,807


6,968


24,775

Gross margin

60%


40%


53%


59%


36%


50%













Operating expenses:












Direct selling and marketing

15,338


767


16,105


13,038


920


13,958

Direct research and development

7,821


-


7,821


6,446


-


6,446

Indirect operating expenses

9,829


889


10,718


8,489


1,338


9,827













(Loss) income from operations

$         (8,817)


$           6,672


$         (2,145)


$ (10,166)


$           4,710


$         (5,456)


























Year Ended December 31, 2015


Year Ended December 31, 2014




Network






Network




Software


Connectivity 


Consolidated


Software


Connectivity 


Consolidated


(unaudited)


(unaudited)


(unaudited)







Net revenue

$       143,719


$         78,268


$       221,987


$ 100,805


$         70,979


$       171,784

Costs of revenue

59,193


48,752


107,945


42,991


45,153


88,144

Gross profit

84,526


29,516


114,042


57,814


25,826


83,640

Gross margin

59%


38%


51%


57%


36%


49%













Operating expenses:












Direct selling and marketing

60,067


3,421


63,488


45,439


3,466


48,905

Direct research and development

27,639


-


27,639


21,030


-


21,030

Indirect operating expenses

35,502


4,284


39,786


28,878


4,099


32,977













(Loss) income from operations

$       (38,682)


$         21,811


$       (16,871)


$ (37,533)


$         18,261


$       (19,272)

 

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 December 31,


Year Ended December 31,


2015


2014


2015


2014

Net loss

$ (3,828)


$ (5,583)


$ (22,784)


$ (10,563)

Depreciation and amortization

5,718


5,152


21,971


17,215

Stock-based compensation

2,267


1,352


8,777


7,142

Interest income and expense, net

1,625


87


5,382


365

Income tax expense (benefit)

55


191


529


(9,071)

Adjusted EBITDA

$  5,837


$  1,199


$  13,875


$    5,088

 




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

(in thousands - unaudited)




Three Months Ended December 31,


Year Ended December 31, 



2015


2014


2015


2014

Consolidated gross profit 


$ 32,499


$ 24,775


$ 114,042


$   83,640

Consolidated gross margin


53%


50%


51%


49%

Add back:









    Amortization of acquired intangibles


1,157


1,315


4,874


3,425

    Stock-based compensation


400


(88)


1,210


511

Non-GAAP gross profit


$ 34,056


$ 26,002


$ 120,126


$   87,576

Non-GAAP gross margin


55%


53%


54%


51%


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

(in thousands - unaudited)




Three Months Ended December 31,


Year Ended December 31, 



2015


2014


2015


2014

Software segment gross profit 


$ 24,171


$ 17,807


$   84,526


$   57,814

Software gross margin


60%


59%


59%


57%

Add back:









    Amortization of acquired intangibles


1,157


1,315


4,874


3,425

    Stock-based compensation


393


(95)


1,183


389

Non-GAAP software gross profit


$ 25,721


$ 19,027


$   90,583


$   61,628

Non-GAAP software gross margin


64%


63%


63%


61%


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

(in thousands - unaudited)





Three Months Ended December 31,


Year Ended December 31, 




2015


2014


2015


2014

Consolidated operating expenses


$ 34,644


$ 30,231


$ 130,913


$ 102,912

Operating expenses as a % of total revenue


56%


61%


59%


60%

Subtract:









    Amortization of acquired intangibles


(20)


(20)


(79)


(80)

    Stock-based compensation


(1,867)


(1,440)


(7,567)


(6,631)

Non-GAAP operating expenses


$ 32,757


$ 28,771


$ 123,267


$   96,201

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


53%


58%


56%


56%


Reconciliation of Consolidated Net Loss to Non-GAAP Consolidated Net Loss 

(in thousands - unaudited)




Three Months Ended December 31,


Year Ended December 31, 



2015


2014


2015


2014

Net loss


$ (3,828)


$ (5,583)


$ (22,784)


$ (10,563)

Adjustments:









    Amortization of acquired intangibles


1,177


1,335


4,953


3,505

    Stock-based compensation


2,267


1,352


8,777


7,142

    Tax benefit (1)


-


-


-


(9,368)

Non-GAAP Net Loss


$    (384)


$ (2,896)


$   (9,054)


$   (9,284)










Non-GAAP basic and diluted earnings per share


$   (0.01)


$   (0.05)


$     (0.15)


$     (0.16)


(1) The one-time, non-cash, $9.4 million tax benefit associated with the Uptivity acquisition, has been eliminated in the full year 2014 reconciliation, to enhance comparability.

 

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.

Logo - http://photos.prnewswire.com/prnh/20120216/LA54560LOGO

 

SOURCE inContact, Inc.



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