inContact, Inc. - FORM 8-K - EX-99.1

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8-K - FORM 8-K - inContact, Inc.	d175924d8k.htm

Exhibit 99.1

inContact Reports First Quarter 2016 Financial Results

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Record Software revenues of $41.5 million in Q1, up 28% year-over-year

•

Consolidated revenue in Q1 of $62.4 million, up 22% year-over-year

•

Adjusted EBITDA in Q1 of $5.7 million, up 117% year-over-year

•

Annualized Recurring Software Revenues up 30% year-over-year

•

Closed record 160 contracts in Q1, two new Fortune 500 customers

•

Raised 2016 guidance for revenue and adjusted EBITDA

SALT LAKE CITY – May 5, 2016 – inContact, Inc. (NASDAQ: SAAS), the leading provider of cloud contact center software and contact center optimization tools, today reported record financial results for the first quarter ended March 31, 2016.

Said Paul Jarman, inContact CEO, “I’m pleased to report record revenues and adjusted EBITDA in the first quarter of 2016. Software revenues grew 28% over last year, and adjusted EBITDA increased 117% year over year to $5.7 million. During the quarter, we brought in two new Fortune 500 accounts and closed a record 160 total contracts, including 106 new logo customers and 54 expansion deals with existing customers. These positive results for the quarter, and a very strong sales pipeline gives us confidence to increase our guidance for revenue and adjusted EBITDA for the full year in 2016.”

Continued Jarman, “In March, inContact was identified by International Data Corp, IDC, as the leading provider in the cloud contact center market. In fact, we were the only company to be placed in IDC’s leader category, shutting out all other competitors. inContact is the only company to receive recognition as a leader by all 5 major analyst firms including Gartner, IDC, Frost & Sullivan, Ovum and DMG.”

Revenue

Software segment revenue totaled $41.5 million for the quarter ended March 31, 2016, an increase of 28% from $32.5 million in Q1 2015. Consolidated revenue for the quarter ended March 31, 2016 was $62.4 million versus $51.3 million for the same period in 2015, an increase of 22%.

As of March 2016 our Annualized Monthly Recurring Software Revenue was $156.2 million, an increase of 30% from $120.4 million as of March 2015.

Gross Margin

Software segment gross margin for the quarter ended March 31, 2016 was 60% versus 58% for the same period in 2015. Non-GAAP Software segment gross margin which represents the elimination of amortization of acquired intangible assets and stock-based compensation was 64% for the first quarter of 2016, versus 63% in the first quarter of 2015 (see reconciliation of non-GAAP measures below). First quarter 2016 Network connectivity segment gross margin was 36% versus 37% for the same period in 2015.

Consolidated gross margin percentage was 52% in the first quarter of 2016 compared to 50% for the same period in 2015. Non-GAAP consolidated gross margin which represents the elimination of amortization of acquired intangible assets and stock-based compensation was 54% for the first quarter 2016 compared to 53% for the same period in 2015 (see reconciliation of non-GAAP measures below).

Operating Expenses

Operating expenses for the first quarter of 2016 were $35.5 million or 57% of total revenue versus $31.2 million or 61% of total revenue during the same period in 2015. Non-GAAP operating expenses which represents the elimination of amortization of acquired intangible assets and stock-based compensation for the first quarter of 2016 were $33.3 million or 53% of total revenue versus $28.8 million or 56% of total revenue during the same period in 2015 (see reconciliation of non-GAAP measures below).

Adjusted EBITDA

Adjusted EBITDA for the first quarter of 2016 was $5.7 million versus $2.6 million during the same period in 2015, an increase of 117%. 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 March 31, 2016 was $2.2 million, or ($0.04) per basic and diluted share, as compared to net loss of $6.0 million or ($0.10) per basic and diluted share for the same period in 2015. Net loss for the quarter ended March 31, 2016 was benefitted by a one-time $2.7 million acquisition related income tax benefit. Non-GAAP net loss for the quarter ended March 31, 2016 was $174,000, or ($0.00) per basic and diluted share, as compared to non-GAAP net loss of $2.0 million or ($0.03) per basic and diluted share for the same period in 2015 (see reconciliation of non-GAAP measures below).

Continued Jarman, “We had an exceptional quarter with our direct sales teams and our growing go-to-market channel including leading carriers, unified communications and PBX companies, VARs, referral and implementation partners. Our sales pipeline is very strong as we continue to sign new customers and expand to new divisions and business units with enterprise customers. There is a large multi-year opportunity ahead of us in the expanding customer experience industry, and inContact is strongly positioned as the leader in terms of growth, profitability and innovation.”

Guidance for 2016

In 2016, we expect Software segment revenues to be between $178.0 million and $184.0 million for the full year. This would represent 24% to 28% growth for software revenues. In 2016, we anticipate total revenues to be between $259.0 million and $265.0 million for the full year. We expect a net loss of ($0.27) to ($0.24) per share on a GAAP basis, and ($0.01) to $0.01 per share on a non-GAAP basis. We expect adjusted EBITDA of $20.5 million to $21.5 million, and expect to generate non-GAAP operating income of between $2.0 million and $2.5 million. This guidance reflects the expected net impact from our two recent acquisitions.

CONFERENCE CALL INFORMATION

We will host a conference call to discuss our first quarter 2016 financial results later today at 4:30 p.m. Eastern time (1:30 p.m. Pacific).

Dial-In Number: 1-877-876-9175

International: +1-785-424-1668

Conference ID#: INCONTACT

An audio file of the call will be available after May 5, 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 May 12, 2016.

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

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

Replay Pin Number: 1233210

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)


	March 31,		December 31,
	2016		2015
ASSETS
Current assets:
Cash and cash equivalents	$	16,296	$	29,050
Restricted cash		—		81
Investments		70,004		75,109
Accounts and other receivables, net of allowance for uncollectible accounts of $1,781 and $2,555, respectively		38,093		37,185
Other current assets		9,595		9,243

Total current assets		133,988		150,668

Property and equipment, net		50,750		42,569
Intangible assets, net		29,573		19,232
Goodwill		49,016		39,247
Other assets		2,724		2,421

Total assets	$	266,051	$	254,137

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	12,915	$	11,607
Accrued liabilities		12,705		12,828
Accrued commissions		4,397		4,615
Current portion of deferred revenue		13,955		11,530

Total current liabilities		43,972		40,580

Deferred revenue		6,439		6,082
Deferred rent and lease incentive obligation		5,814		3
Deferred tax liability, net		256		230
Long-term debt		83,029		81,985

Total liabilities		139,510		128,880

Total stockholders’ equity		126,541		125,257

Total liabilities and stockholders’ equity	$	266,051	$	254,137

INCONTACT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(in thousands, except per share data)


	Three Months
	Ended March 31,
	2016			2015
Net revenue:
Software	$	41,548		$	32,466
Network connectivity		20,839			18,872

Total net revenue		62,387			51,338

Costs of revenue:
Software		16,665			13,697
Network connectivity		13,436			11,811

Total costs of revenue		30,101			25,508

Gross profit		32,286			25,830

Operating expenses:
Selling and marketing		18,210			15,475
Research and development		8,609			6,653
General and administrative		8,675			9,078

Total operating expenses		35,494			31,206

Loss from operations		(3,208	)		(5,376	)
Other income (expense):
Interest expense		(1,765	)		(434	)
Interest income		155			1
Other income (expense)		(1	)		—

Loss before income taxes		(4,819	)		(5,809	)
Income tax benefit (expense)		2,590			(179	)

Net loss	$	(2,229	)	$	(5,988	)

Net loss per common share:
Basic and diluted	$	(0.04	)	$	(0.10	)

Weighted average common shares outstanding:
Basic and diluted		62,263			61,484

INCONTACT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (Unaudited)

(in thousands)


	Three Months Ended March 31,
	2016			2015
Cash flows from operating activities:
Net loss	$	(2,229	)	$	(5,988	)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation of property and equipment		3,076			2,379
Amortization of software development costs		2,097			1,662
Amortization of intangible assets		1,285			1,363
Amortization of deferred debt issuance costs		97			199
Stock-based compensation		2,489			2,614
Loss on disposal of property and equipment		480			36
Interest accretion		947			—
Amortization of investment premium		278			—
Deferred income taxes		(2,640	)		—
Changes in operating assets and liabilities, net of business acquisitions:
Accounts and other receivables, net		(758	)		(2,440	)
Other current assets		(339	)		(1,056	)
Other non-current assets		(304	)		(31	)
Trade accounts payable		847			(243	)
Accrued liabilities		(112	)		(1,779	)
Accrued commissions		(218	)		70
Deferred rent and lease incentive obligation		5,814			—
Other long-term liabilities		(60	)		(92	)
Deferred revenue		2,526			3,243

Net cash provided by (used in) operating activities		13,276			(63	)

Cash flows from investing activities:
Decrease in restricted cash		81			—
Sales and maturities of available for sale investments		20,777			—
Purchases of available for sale investments		(15,879	)		—
Capitalized software development costs		(3,819	)		(2,123	)
Purchases of property and equipment		(9,353	)		(3,947	)
Business acquisitions, net of cash acquired		(18,446	)		—

Net cash used in investing activities		(26,639	)		(6,070	)

Cash flows from financing activities:
Proceeds from exercise of options		751			2,274
Proceeds from sale of stock under employee stock purchase plan		387			321
Principal payments under debt and capital lease obligations		—			(11,824	)
Purchase of treasury stock		(529	)		(225	)
Payments under revolving credit agreement		—			(11,000	)
Proceeds from issuance of convertible notes, net		—			111,320

Net cash provided by financing activities		609			90,866

Net (decrease) increase in cash and cash equivalents		(12,754	)		84,733

Cash and cash equivalents at the beginning of the period		29,050			32,414

Cash and cash equivalents at the end of the period	$	16,296		$	117,147

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. 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 March 31, 2016 and 2015 were as follows (in thousands):


	Three Months Ended March 31, 2016									Three Months Ended March 31, 2015
				Network									Network
	Software			Connectivity			Consolidated			Software			Connectivity			Consolidated
Net revenue	$	41,548		$	20,839		$	62,387		$	32,466		$	18,872		$	51,338
Costs of revenue		16,665			13,436			30,101			13,697			11,811			25,508

Gross profit		24,883			7,403			32,286			18,769			7,061			25,830

Gross margin		60	%		36	%		52	%		58	%		37	%		50	%

Operating expenses:
Direct selling and marketing		16,425			856			17,281			13,986			823			14,809
Direct research and development		7,965			—			7,965			6,293			—			6,293
Indirect		9,349			899			10,248			9,035			1,069			10,104

Loss from operations	$	(8,856	)	$	5,648		$	(3,208	)	$	(10,545	)	$	5,169		$	(5,376	)

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.