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TMCNet:  inContact Reports Third Quarter 2012 Financial Results

[November 01, 2012]

inContact Reports Third Quarter 2012 Financial Results

SALT LAKE CITY, Nov. 1, 2012 /PRNewswire via COMTEX/ -- inContact, Inc. (NASDAQ: SAAS), the leading provider of cloud contact center software and contact center agent optimization tools, today reported financial results for the third quarter ended September 30, 2012.


(Logo: http://photos.prnewswire.com/prnh/20120216/LA54560LOGO) Said Paul Jarman, inContact CEO, "It was a strong quarter for inContact across all of our financial metrics. We are benefiting from the overall momentum of cloud adoption and the power of our recurring cloud model. During the quarter, we achieved a new record in annual contract value booked and we closed 50 new customers and 19 expansion deals for a total of 69 contracts." Revenue Software segment revenue totaled $14.0 million for the quarter ended September 30, 2012, an increase of 40% from Q3 2011 and an increase of 9% from $12.8 million in Q2 2012. Software segment revenue exceeded Telecom segment revenue for the first time in Q3 2012. Telecom segment revenue for Q3 2012 was $13.9 million, an increase of $1.8 million or 14% from $12.1 million in Q3 2011. This increase marks the eighth consecutive quarter that software and software related telecom revenue has increased.

Consolidated revenue for the quarter ended September 30, 2012 was $27.9 million versus $22.2 million for the same period in 2011, an increase of 26%.

For the nine months ended September 30, 2012, Software segment revenue totaled $39.1 million, an increase of 36% from $28.9 million in 2011. For the nine months ended September 30, 2012, Telecom segment revenue totaled $40.6 million, an increase of 12% from $36.4 million for 2011.

Gross Margin The Q3 Software segment gross margin was 60% versus 55% in Q3 2011, and excluding non-cash charges, non-GAAP Software segment gross margin was 72% for the quarter, versus 69% in Q3 2011. This increase in gross margin is principally attributable to revenue increases in 2012 in excess of higher costs of revenue. Third quarter 2012 Telecom segment gross margin was 34% versus 25% in Q3 2011.

Consolidated gross margin percentage was 47% in the third quarter compared to 39% for the same period in 2011. Excluding non-cash charges, non-GAAP consolidated gross margin was 54% for the third quarter compared to 46% for the same period in 2011.

EBITDAS Earnings before interest, taxes, depreciation and amortization and stock-based compensation ("EBITDAS") for the third quarter was $2.2 million versus a negative $590,000 during the same period in 2011. Our increase in EBITDAS is primarily due to the increase in margins discussed above. EBITDAS is a non-GAAP measure management believes provides important insight into our operating results (see reconciliation of non-GAAP measures below).

Net Results GAAP net loss for quarter ended September 30, 2012 was $953,000, or ($0.02) per share, as compared to a net loss of $3.2 million, or ($0.07) per share for the same period in 2011. This decrease in net loss is primarily due to increased revenues and improved margins.

Jarman concluded, "We have another record quarter behind us as our software revenue run rate grows at a very healthy rate. We will continue to leverage the market opportunity before us through innovation in our platform, growth in our ecosystem, and expanding leverage through key partnerships. We are on track to achieve our 2012 guidance, and look forward to continuing this progress in 2013." CONFERENCE CALL INFORMATION We will host a conference call to discuss our third quarter 2012 financial results later today, November 1, 2012, at 4:30 p.m. Eastern time (1:30 p.m. Pacific).

Dial-in Number: 1-866-952-1906 International Dial-in Number: + 1-785-424-1825 Conference ID#: INCONTACT Webcast URL: http://investor.inContact.com An audio file of the call will be available after November 1, 2012 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 16, 2012: Toll-free replay number: 1-877-870-5176 International replay number: + 1-858-384-5517 Replay Pin Number: 12328 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, 2012 2011 ASSETS Current assets: Cash and cash equivalents $ 48,513 $ 17,724 Restricted cash 81 246 Accounts and other receivables, net of allowance for uncollectible accounts of $906 and $491, respectively 15,833 12,916 Other current assets 3,447 2,526 Total current assets 67,874 33,412 Property and equipment, net 20,273 18,685 Intangible assets, net 1,342 1,394 Goodwill 4,086 4,086 Other assets 951 837 Total assets $ 94,526 $ 58,414 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Trade accounts payable $ 7,405 $ 7,180 Accrued liabilities 2,588 2,769 Accrued commissions 1,563 1,291 Current portion of deferred revenue 1,665 1,056 Current portion of long-term debt and capital lease obligations 2,806 2,831 Total current liabilities 16,027 15,127 Long-term debt and capital lease obligations 2,509 5,964 Deferred rent 370 161 Deferred revenue 1,947 946 Total liabilities 20,853 22,198 Total stockholders' equity 73,673 36,216 Total liabilities and stockholders' equity $ 94,526 $ 58,414 INCONTACT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS and COMPREHENSIVE LOSS (Unaudited) (in thousands, except per share data) Three months Nine months ended September 30, ended September 30, 2012 2011 2012 2011 Net revenue: Software $ 13,976 $ 10,015 $ 39,106 $ 28,852 Telecom 13,886 12,137 40,646 36,378 Total net revenue 27,862 22,152 79,752 65,230 Costs of revenue: Software 5,623 4,488 15,972 12,071 Telecom 9,195 9,049 27,618 26,680 Total costs of revenue 14,818 13,537 43,590 38,751 Gross profit 13,044 8,615 36,162 26,479 Operating expenses: Selling and marketing 6,956 6,641 20,874 17,738 Research and development 2,495 1,575 6,611 4,347 General and administrative 4,341 3,451 12,484 10,103 Total operating expenses 13,792 11,667 39,969 32,188 Loss from operations (748) (3,052) (3,807) (5,709) Other income (expense): Interest income - - 3 - Interest expense (129) (59) (331) (337) Change in fair value of warrants - - - (158) Other expense (55) (42) (201) (58) Total other expense (184) (101) (529) (553) Loss before income taxes (932) (3,153) (4,336) (6,262) Income tax expense (21) (17) (51) (48) Net loss and comprehensive loss $ (953) $ (3,170) $ (4,387) $ (6,310) Net loss per common share: Basic and diluted $ (0.02) $ (0.07) $ (0.10) $ (0.16) Weighted average common shares outstanding: Basic and diluted 46,214 43,836 44,992 39,238 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 the year ended 2013, 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 three and nine month ended September 30, 2012 and 2011 were as follows (in thousands): Three months ended September 30, 2012 Three months ended September 30, 2011 Software Telecom Consolidated Software Telecom Consolidated (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Net revenue $ 13,976 $ 13,886 $ 27,862 $ 10,015 $ 12,137 $ 22,152 Costs of revenue 5,623 9,195 14,818 4,488 9,049 13,537 Gross profit 8,353 4,691 13,044 5,527 3,088 8,615 Gross margin 60% 34% 47% 55% 25% 39% Operating expenses: Direct selling and marketing 5,807 744 6,551 5,428 856 6,284 Direct research and development 2,252 - 2,252 1,412 - 1,412 Indirect 4,301 688 4,989 3,193 778 3,971 (Loss) income from operations $ (4,007) $ 3,259 $ (748) $ (4,506) $ 1,454 $ (3,052) Nine months ended September 30, 2012 Nine months ended September 30, 2011 Software Telecom Consolidated Software Telecom Consolidated (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) Net revenue $ 39,106 $ 40,646 $ 79,752 $ 28,852 $ 36,378 $ 65,230 Costs of revenue 15,972 27,618 43,590 12,071 26,680 38,751 Gross profit 23,134 13,028 36,162 16,781 9,698 26,479 Gross margin 59% 32% 45% 58% 27% 41% Operating expenses: Direct selling and marketing 17,330 2,354 19,684 14,248 2,520 16,768 Direct research and development 5,954 - 5,954 3,886 - 3,886 Indirect 12,129 2,202 14,331 9,169 2,365 11,534 (Loss) income from operations $ (12,279) $ 8,472 $ (3,807) $ (10,522) $ 4,813 $ (5,709) RECONCILIATION of NON-GAAP MEASURES: "EBITDAS" 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). EBITDAS 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 EBITDAS to Net loss applicable to common stockholders as it is presented on the Condensed Consolidated Statements of Operations for inContact, Inc.

(in thousands - unaudited) Quarter ended September 30, Nine Months ended September 30, 2012 2011 2012 2011 Net loss $ (953) $ (3,170) $ (4,387) $ (6,310) Depreciation and amortization 2,435 1,954 6,911 5,211 Stock-based compensation 530 550 1,380 1,167 Interest, net 129 59 328 337 Income tax expense 21 17 51 48 EBITDAS $ 2,162 $ (590) $ 4,283 $ 453 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 September 30, 2012 Quarter ended September 30, 2011 Gross Profit Gross Margin Gross Profit Gross Margin Consolidated gross profit and margin $ 13,044 47% $ 8,615 39% Depreciation and amortization 1,853 7% 1,547 7% Stock-based compensation 68 0% 74 0% Consolidated gross profit and margin, excluding non-cash charges $ 14,965 54% $ 10,236 46% 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 September 30, 2012 Quarter ended September 30, 2011 Gross Profit Gross Margin Gross Profit Gross Margin Software segment gross profit and margin $ 8,353 60% $ 5,527 55% Depreciation and amortization 1,626 12% 1,274 13% Stock-based compensation 67 0% 71 1% Software segment gross profit and margin, excluding non-cash charges $ 10,046 72% $ 6,872 69% 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.

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