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inContact Inc. Reports Operating Results (10-Q)

November 02, 2012 | About:
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inContact Inc. (SAAS) filed Quarterly Report for the period ended 2012-09-30.

Incontact, Inc. has a market cap of $307.3 million; its shares were traded at around $5.72 with and P/S ratio of 3.5.
This is the annual revenues and earnings per share of SAAS over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of SAAS.


Highlight of Business Operations:

Total revenues increased $5.7 million or 26% to $27.9 million during the three months ended September 30, 2012 compared to revenues of $22.2 million for the same period in 2011. The increase relates primarily to revenue generated from our inContact portfolio of cloud contact center solutions and the associated Telecom revenue and is due to our continued focus and investment in sales and marketing through our direct sales initiatives and referral partner arrangements. We recognized $1.25 million of software revenue during the three months ended September 30, 2012, under an arrangement with a reseller, a principal shareholder of inContact, which includes revenue from resold software services and amounts up to the quarterly minimum purchase commitments. Under the arrangement, revenue from resold software services reduces the reseller’s obligation up to the amount of the quarterly minimum purchase commitments. These minimum purchase commitments were negotiated, in part, to mitigate the risks associated with the investment in infrastructure to support our expanded reseller sales and marketing efforts initiated in 2011 and expire at the end of 2013. If revenue from resold software services does not meet the quarterly minimum purchase commitment at the end of 2013, there will be a reduction in software revenue from that reseller at the beginning of 2014 to the extent the revenue from resold software services is less than the quarterly minimum purchase commitment at the end 2013.

Costs of revenue increased $1.3 million or 9% to $14.8 million during the three months ended September 30, 2012 compared to $13.5 million for the same period in 2011. Our gross margin increased eight percentage points to 47% during the three months ended September 30, 2012 from 39% during the three months ended September 30, 2011. The increase in revenue from our inContact portfolio and the minimum purchase commitment offset increased costs attributable to greater professional service and customer service personnel costs incurred to service larger mid-market and enterprise customers and to support resellers, international infrastructure investments initiated in 2011 and increased amortization of previously capitalized software development costs. In addition, lower Telecom costs due to increased efficiencies in call routing related to a 2011 investment in technology and lower negotiated direct costs contributed to the gross margin increase.

Costs of revenue increased $4.8 million or 12% to $43.6 million during the nine months ended September 30, 2012 compared to $38.8 million for the same period in 2011. Our gross margin increased four percentage points to 45% during the nine months ended September 30, 2012 from 41% during the nine months ended September 30, 2011. The increase in revenue from our inContact portfolio and the minimum purchase commitment offset increased costs attributable to greater professional service and customer service personnel costs incurred to service larger mid-market and enterprise customers and to support resellers, international infrastructure investments initiated in 2011 and increased amortization of previously capitalized software development costs. In addition, lower Telecom costs due to increased efficiencies in call routing related to a 2011 investment in technology and lower negotiated direct costs contributed to the gross margin increase.

Telecom segment revenue increased $1.8 million or 14% to $13.9 million during the three months ended September 30, 2012 compared to $12.1 million for the same period in 2011 due to the increase of Telecom revenue associated with our inContact portfolio customers exceeding the attrition of our Telecom only customers. Our costs of revenue increased 2% due to the increase in revenue, but Telecom gross margin increased 9% due to increased efficiencies in call routing related to a 2011 investment in technology and lower negotiated direct costs, which resulted in lower Telecom costs. Selling and marketing expenses decreased $112,000 or 13% during the three months ended September 30, 2012 as compared to the same period in 2011, primarily due to lower third-party commissions associated with Telecom only customer revenue. Indirect expenses, which consist of overhead, such as compensation, rent, utilities and depreciation on property and equipment decreased $90,000 or 12% during the three months ended September 30, 2012 compared to the same period in 2011 as a result of more indirect costs being allocated to the Software segment with the continued shift in revenue and direct expense mix from the Telecom segment to the Software segment.

Overall Telecom segment revenue increased $4.3 million or 12% to $40.7 million during the nine months ended September 30, 2012 from $36.4 million for the same period in 2011 due to the increase of Telecom revenue associated with our inContact portfolio customers exceeding the attrition of our Telecom only customers. Our costs of revenue increased 4% due to the increase in revenue, but Telecom gross margin increased 5% due to increased efficiencies in call routing related to a 2011 investment in technology and lower negotiated direct costs, which resulted in lower Telecom costs. Selling and marketing expenses decreased $166,000 or 7% during the nine months ended September 30, 2012 as compared to the same period in 2011, primarily due to lower third-party commissions associated with Telecom only customer revenue. Indirect expenses, which consist of overhead, such as compensation, rent, utilities and depreciation on property and equipment, decreased $163,000 or 7% during the nine months ended September 30, 2012 compared to the same period in 2011 as a result of more indirect costs being allocated to the Software segment with the continued shift in revenue and direct expense mix from the Telecom segment to the Software segment.

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