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Last updated on April 18, 2014 at 16:41 EDT

inContact Reports Fourth Quarter and Full Year 2012 Financial Results

February 14, 2013

SALT LAKE CITY, Feb. 14, 2013 /PRNewswire/ — inContact, Inc. (NASDAQ: SAAS), the leading provider of cloud contact center software and contact center agent optimization tools, today reported financial results for the fourth quarter and year ended December 31, 2012.

(Logo: http://photos.prnewswire.com/prnh/20120216/LA54560LOGO)

Said Paul Jarman, inContact CEO, “It was another record quarter for inContact and we closed 51 new customers and 11 expansions for a total of 62 contracts. In addition, during the quarter, we added 2 new Fortune 500 customers and booked the largest deal in the company’s history.”

Continued Jarman, “2012 was a great year for inContact driven by growth in the following key areas: new bookings, as we continue our focus on sales and marketing, revenue from existing accounts, as our “land and expand strategy” delivered strong results, and customer retention, as the recurring revenue model continues to demonstrate its true power. These three growth pillars combined to create a powerful result in 2012, giving us a software growth rate for the full year 2012 of 37%.”

Revenue

Consolidated revenue for the quarter ended December 31, 2012 was $30.7 million versus $23.8 million for the same period in 2011. This record consolidated revenue reflects an increase of $4.6 million in Software segment revenue and an increase of $2.4 million in Telecom segment revenue over the same period in 2011. Software segment revenue totaled $15.6 million for the quarter ended December 31, 2012, an increase of 42% from Q4 2011 and the largest organic quarterly sequential increase ever. Telecom segment revenue totaled $15.1 million for the quarter ended December 31, 2012, an increase of 19% from Q4 2011, driven by increases in software-related telecom revenue. This increase marks the ninth consecutive quarter that software and software related telecom revenue has increased.

For the year ended December 31, 2012, Software segment revenue totaled $54.7 million, an increase of 37% from $39.9 million for 2011. For the year ended December 31, 2012, Telecom segment revenue totaled $55.8 million, an increase of 14% from $49.1 million for 2011

Gross Margin

The Q4 Software segment gross margin was 60% versus 56% in Q4 2011, and excluding non-cash charges, non-GAAP Software segment gross margin was 72% for the quarter, versus 68% in Q4 2011. This increase in gross margin is principally attributable to revenue increases in 2012 as well as operational efficiencies and leverage in international infrastructure investments made in Q4 of 2011. Fourth quarter 2012 Telecom segment gross margin was 34% versus 30% in Q4 2011.

Consolidated gross margin percentage was 47% in the fourth quarter compared to 42% for the same period in 2011. Excluding non-cash charges, consolidated gross margin was 54% for the fourth quarter compared to 48% for the same period in 2011.

Net Results

GAAP net loss for the quarter ended December 31, 2012 was $793,000, or ($0.01) per share, as compared to a net loss of $3.1 million, or ($0.07) per share for the same period in 2011. This decrease in net loss is primarily due to the combination of increased revenues and improved margins.

For the full year ended December 31, 2012, the Company reported a GAAP net loss of $5.2 million versus a net loss of $9.4 million for 2011.

Adjusted EBITDA

Earnings before interest, taxes, depreciation, amortization and stock-based compensation (“Adjusted EBITDA”) for the fourth quarter was $2.4 million versus ($761,000) during the same period in 2011. Our increase in Adjusted EBITDA is primarily due to the increase in margins discussed above. Adjusted EBITDA is a non-GAAP measure management believes provides important insight into our operating results (see reconciliation of non-GAAP measures below).

Jarman concluded, “We are pleased to have achieved the high end of our market guidance in 2012 and believe these results have established the foundation for a strong growth trajectory for 2013. We’ve made significant progress over the past year in supporting our resellers, expanding sales and marketing initiatives, developing cutting-edge innovation and delivering unmatched customer satisfaction. This progress, combined with our cloud market leadership, positions us extremely well throughout 2013 and beyond, as the cloud contact center market continues to accelerate.”

CONFERENCE CALL INFORMATION

We will host a conference call to discuss our fourth quarter and year ended 2012 financial results later today, February 14(th), 2013, at 4:30 p.m. Eastern time (1:30 p.m. Pacific).

Dial-in Number: 1-866-952-7532
International Dial-in Number: + 1-785-424-1834
Conference ID#: INCONTACT

An audio file of the call will be available after February 16, 2013 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 21, 2013:

Toll-free replay number: 1-877-870-5176
International replay number: + 1-858-384-5517
Replay Pin Number: 12329

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,
                                                                           2012                  2011
                                                                           ----                  ----
                       ASSETS                             (Unaudited)
    Current assets:
    Cash and cash equivalents                                           $48,836               $17,724
    Restricted cash                                                          81                   246
    Accounts and other
     receivables, net of
     allowance for uncollectible
    accounts of $831 and $491
     respectively                                                        18,043                12,916
    Other current assets                                                  3,278                 2,526
                                                                          -----                 -----
    Total current assets                                                 70,238                33,412

    Property and equipment, net                                          19,862                18,685
    Intangible assets, net                                                1,156                 1,394
    Goodwill                                                              4,086                 4,086
    Other assets                                                          1,005                   837
    Total assets                                                        $96,347               $58,414
                                                                        =======               =======

    LIABILITIES AND
     STOCKHOLDERS' EQUITY
    Current liabilities:
    Trade accounts payable                                               $7,247                $7,180
    Accrued liabilities                                                   3,820                 2,769
    Accrued commissions                                                   1,610                 1,291
    Current portion of deferred
     revenue                                                              1,973                 1,056
    Current portion of long-
     term debt and capital lease
     obligations                                                          2,691                 2,831
    Total current liabilities                                            17,341                15,127

    Long-term debt and capital
     lease obligations                                                    2,859                 5,964
    Deferred rent                                                           383                   161
    Deferred revenue                                                      1,958                   946
                                                                          -----                   ---
    Total liabilities                                                    22,541                22,198
                Total stockholders' equity                               73,806                36,216
                                                                         ------                ------
                Total liabilities and
                 stockholders' equity                                   $96,347               $58,414
                                                                        =======               =======

                                                         INCONTACT, INC.
                                              CONSOLIDATED STATEMENTS OF OPERATIONS
                                              (in thousands, except per share data)

                                                 Quarter ended December 31,                  Year ended December 31,
                                                 --------------------------                  -----------------------
                                                            2012                       2011              2012           2011
                                                            ----                       ----              ----           ----
                                                   (Unaudited)                (Unaudited)       (Unaudited)
    Net revenue:
    Software                                             $15,599                    $11,018           $54,705        $39,870
    Telecom                                               15,133                     12,737            55,779         49,115
    Total net revenue                                     30,732                     23,755           110,484         88,985
                                                          ------                     ------           -------         ------
    Costs of revenue:
    Software                                               6,162                      4,869            22,134         16,940
    Telecom                                               10,024                      8,957            37,642         35,637
    Total costs of revenue                                16,186                     13,826            59,776         52,577
                                                          ------                     ------            ------         ------
    Gross profit                                          14,546                      9,929            50,708         36,408
                                                          ------                      -----            ------         ------

    Operating expenses:
    Selling and marketing                                  7,717                      6,825            28,591         24,563
    Research and development                               2,790                      2,007             9,401          6,354
    General and
     administrative                                        4,656                      3,987            17,140         14,090

    Total operating expenses                              15,163                     12,819            55,132         45,007
                                                          ------                     ------            ------         ------
    Loss from operations                                    (617)                    (2,890)           (4,424)        (8,599)
    Other income (expense):
    Interest income                                            -                          1                 3              1
    Interest expense                                         (33)                      (170)             (364)          (507)
    Change in fair value of
     warrants                                                  -                          -                 -           (158)
    Other expense                                            (74)                       (33)             (275)           (91)

    Total other expense                                     (107)                      (202)             (636)          (755)
                                                            ----                       ----              ----           ----

    Loss before income taxes                                (724)                    (3,092)           (5,060)        (9,354)

    Income tax expense                                       (69)                       (26)             (120)           (74)
                                                             ---                        ---              ----            ---
    Net loss                                               $(793)                   $(3,118)          $(5,180)       $(9,428)
                                                           =====                    =======           =======        =======

    Net loss per common share:
    Basic and diluted                                     $(0.01)                    $(0.07)           $(0.11)        $(0.23)

    Weighted average common shares outstanding:
    Basic and diluted                                     53,410                     43,980            47,108         40,434

    Diluted                                               53,410                     43,980            47,108         40,434

                                 INCONTACT, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                                    Year ended December 31,
                                                    -----------------------
                                                             2012              2011
                                                             ----              ----
                                                     (Unaudited)
    Cash flows from operating
     activities:
    Net loss                                              $(5,180)          $(9,428)
    Adjustments to reconcile net loss
     to net cash from (used in)
     operating activities:
    Depreciation of property and
     equipment                                              5,047             3,504
    Amortization of software
     development costs                                      4,133             2,994
    Amortization of intangible assets                         238               544
    Amortization of note financing
     costs                                                     29                61
    Interest accretion                                          9                16
    Stock-based compensation                                1,967             1,431
    Warrants and stock issued for
     services                                                   -                67
    Change in fair value of warrants                            -               158
    Loss on disposal of property and
     equipment                                                274                95
    Intangible assets written off                             133                 -
    Changes in operating assets and
     liabilities:
    Accounts and other receivables, net                    (5,178)           (3,522)
    Other current assets                                     (758)             (405)
    Other non-current assets                                 (144)             (375)
    Trade accounts payable                                     92                 2
    Accrued liabilities                                     1,245               411
    Accrued commissions                                       319               233
    Deferred rent                                              78               (88)
    Deferred revenue                                        1,929             1,070
                                                            -----             -----

    Net cash from (used in) operating
     activities                                             4,233            (3,232)
                                                            -----            ------

    Cash flows from investing
     activities:
    Gross decrease in restricted cash                         165                 -
    Contingent purchase price payments                          -              (135)
    Purchase of intangible assets                            (133)                -
    Payments made for deposits                                (23)              (98)
    Proceeds from deposits                                      -               181
    Capitalized software development
     costs                                                 (5,504)           (4,753)
    Purchases of property and equipment                    (3,737)           (5,217)
                                                           ------            ------

    Net cash used in investing
     activities                                            (9,232)          (10,022)
                                                           ------           -------

    Cash flows from financing
     activities:
    Proceeds from issuance of common
     stock                                                 37,475            23,865
    Offering costs payments                                  (214)              (32)
    Proceeds from exercise of options
     and warrants                                           3,262             1,182
    Proceeds from sale of stock under
     employee stock purchase plan                             280               225
    Principal payments on long-term
     debt and capital leases                               (3,163)           (2,234)
    Borrowings under promissory note                            -             2,500
    Payment of debt financing fees                            (29)              (79)
    Borrowings under the revolving
     credit notes                                           7,000            12,730
    Payments under the revolving credit
     notes                                                 (8,500)          (17,500)
                                                           ------           -------

    Net cash from financing activities                     36,111            20,657
                                                           ------            ------

    Net increase (decrease) in cash and
     cash equivalents                                      31,112             7,403
    Cash and cash equivalents at the
     beginning of the year                                 17,724            10,321
                                                           ------            ------

    Cash and cash equivalents at the
     end of the year                                      $48,836           $17,724
                                                          =======           =======

SEGMENT REPORTING

We operate under two business segments: Software and Telecom. The Software segment includes all monthly recurring 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 Telecom 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 quarters and years ended December 31, 2012 and 2011 were as follows (in thousands):

                                  Quarter Ended December 31, 2012             Year Ended December 31, 2012
                                  -------------------------------             ----------------------------
                                        Software                    Telecom                            Consolidated         Software           Telecom         Consolidated
                                        --------                    -------                            ------------         --------           -------         ------------
                                       (Unaudited)                (Unaudited)                           (Unaudited)       (Unaudited)       (Unaudited)         (Unaudited)
    Net revenue                                         $15,599               $15,133                               $30,732            $54,705          $55,779             $110,484
    Costs of revenue                                      6,162                10,024                                16,186             22,134           37,642               59,776
                                                          -----                ------                                ------             ------           ------               ------
    Gross profit                                          9,437                 5,109                                14,546             32,571           18,137               50,708
    Gross margin                                             60%                   34%                                   47%                60%              33%                  46%

    Operating expenses:
    Direct selling and marketing                          6,428                   853                                 7,281             23,758            3,207               26,965
    Direct research and
     development                                          2,548                     -                                 2,548              8,502                -                8,502
    Indirect                                              4,559                   775                                 5,334             16,688            2,977               19,665

    Income (loss) from operations                       $(4,098)               $3,481                                 $(617)          $(16,377)         $11,953              $(4,424)
                                                        =======                ======                                 =====           ========          =======              =======

                                  Quarter Ended December 31, 2011                      Year Ended December 31, 2011
                                  -------------------------------                      ----------------------------
                                        Software                    Telecom                            Consolidated          Software           Telecom          Consolidated
                                        --------                    -------                            ------------          --------           -------          ------------
                                       (Unaudited)                (Unaudited)                           (Unaudited)
    Net revenue                                         $11,018               $12,737                               $23,755            $39,870          $49,115              $88,985
    Costs of revenue                                      4,869                 8,957                                13,826             16,940           35,637               52,577
                                                          -----                 -----                                ------             ------           ------               ------
    Gross profit                                          6,149                 3,780                                 9,929             22,930           13,478               36,408
    Gross margin                                             56%                   30%                                   42%                58%              27%                  41%

    Operating expenses:
    Direct selling and marketing                          5,561                   901                                 6,462             19,810            3,421               23,231
    Direct research and
     development                                          1,820                     -                                 1,820              5,706                -                5,706
    Indirect                                              3,565                   972                                 4,537             12,734            3,336               16,070

    Income (loss) from operations                       $(4,797)               $1,907                               $(2,890)          $(15,320)          $6,721              $(8,599)
                                                        =======                ======                               =======           ========           ======              =======

RECONCILIATION of NON-GAAP MEASURES:

“Adjusted EBITDA” is Earnings Before deductions for Interest, Taxes, Depreciation and Amortization and Stock-Based Compensation. “Gross Margin Before deductions for Depreciation and Amortization and Stock-Based Compensation” is Gross Margin before deductions for Depreciation and Amortization and Stock-Based Compensation. Neither are measures of financial performance under generally accepted accounting principles (GAAP). Adjusted EBITDA and Gross Margin Before deductions for Depreciation and Amortization and Stock-Based Compensation 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 Consolidated
                            Statements of Operations for inContact, Inc.
                                     (in thousands - unaudited)

                                             Quarter ended
                                             December 31,
                                            --------------
                                                         2012                       2011
                                                         ----                       ----
    Net loss                                            $(793)                   $(3,118)

    Depreciation and
     amortization                                       2,507                      1,831
    Stock-based
     compensation                                         587                        331
    Interest income
     and expense, net                                      33                        169
    Income tax expense                                     69                         26
                                                          ---                        ---

    Adjusted EBITDA                                    $2,403                      $(761)
                                                       ======                      =====

                                         Year ended December
                                                  31,
                                        --------------------
                                                         2012                       2011
                                                         ----                       ----
    Net loss                                          $(5,180)                   $(9,428)

    Depreciation and
     amortization                                       9,418                      7,042
    Stock-based
     compensation                                       1,967                      1,498
    Interest income
     and expense, net                                     361                        506
    Income tax expense                                    120                         74
                                                          ---                        ---

    Adjusted EBITDA                                    $6,686                      $(308)
                                                       ======                      =====

             Reconciliation of Consolidated Gross Profit and Margin to Consolidated Gross Profit and Margin Before deductions for Depreciation and Amortization and Stock-Based Compensation, as
                                                                                      presented in Segment Reporting for
                                                                                               inContact, Inc.

                                                                                          (in thousands - unaudited)

                                               Quarter ended December 31,                   Quarter ended December 31,
                                                          2012                                          2011
                                              ---------------------------                  ---------------------------
                                                     Gross Profit                                  Gross Margin                                 Gross Profit                               Gross Margin
                                                     ------------                                  ------------                                 ------------                               ------------
    Consolidated gross profit and
     margin                                                           $14,546                                       47%                                           $9,929                                  42%

     Depreciation and amortization                                      1,904                                        6%                                            1,387                                   6%
     Stock-based compensation                                              99                                        0%                                               85                                   0%
                                                                          ---                                                                                        ---
     Consolidated gross profit and
      margin,                                                         $16,549                                       54%                                          $11,401                                  48%
        excluding non-cash charges

                Reconciliation of Software Segment Gross Profit and Margin to Software Segment Gross Profit and Margin Before deductions for Depreciation and Amortization and Stock-Based
                                                                    Compensation, as presented in Segment Reporting for inContact, Inc.

                                                                                        (in thousands - unaudited)

                                               Quarter ended December 31,                   Quarter ended December 31,
                                                          2012                                          2011
                                              ---------------------------                  ---------------------------
                                                     Gross Profit                                  Gross Margin                                 Gross Profit                               Gross Margin
                                                     ------------                                  ------------                                 ------------                               ------------
    Software segment gross profit and
     margin                                                            $9,437                                       60%                                           $6,149                                  56%

    Depreciation and amortization                                       1,687                                       11%                                            1,271                                  12%
    Stock-based compensation                                               96                                        1%                                               81                                   1%
                                                                          ---                                                                                        ---
    Software segment gross profit and
     margin,                                                          $11,220                                       72%                                           $7,501                                  68%
        excluding non-cash charges

About inContact

inContact (NASDAQ:SAAS) helps contact centers around the globe create profitable customer experiences through its powerful portfolio of cloud contact center software solutions. The company’s services and solutions enable contact centers to operate more efficiently, optimize the cost and quality of every customer interaction, create new pathways to profit and ensure ongoing customer-centric business improvement and growth. To learn more, visit www.inContact.com.

inContact® is the registered trademark of inContact, Inc.

SOURCE inContact, Inc.


Source: PR Newswire