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SEC Filings

10-Q
INCONTACT, INC. filed this Form 10-Q on 11/09/2016
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Nine Months Ended September 30, 2016 and 2015

The following is a tabular presentation of our condensed consolidated operating results for the nine months ended September 30, 2016 compared to our condensed consolidated operating results for the nine months ended September 30, 2015 (in thousands, except percentages):

 

 

 

2016

 

 

 

2015

 

 

$ Change

 

 

% Change

 

Net revenue

$

193,203

 

 

$

160,487

 

 

$

32,716

 

 

 

20%

 

Costs of revenue

 

92,200

 

 

 

78,944

 

 

 

13,256

 

 

 

17%

 

Gross profit

 

101,003

 

 

 

81,543

 

 

 

19,460

 

 

 

 

 

Gross margin

 

52

%

 

 

51

%

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

55,352

 

 

 

49,549

 

 

 

5,803

 

 

 

12%

 

Research and development

 

27,097

 

 

 

21,021

 

 

 

6,076

 

 

 

29%

 

General and administrative

 

32,326

 

 

 

25,699

 

 

 

6,627

 

 

 

26%

 

Total operating expenses

 

114,775

 

 

 

96,269

 

 

 

18,506

 

 

 

 

 

Loss from operations

 

(13,772

)

 

 

(14,726

)

 

 

954

 

 

 

 

 

Other expense

 

(5,033

)

 

 

(3,756

)

 

 

(1,277

)

 

 

 

 

Loss before income taxes

 

(18,805

)

 

 

(18,482

)

 

 

(323

)

 

 

 

 

Income tax benefit (expense)

 

2,296

 

 

 

(474

)

 

 

2,770

 

 

 

 

 

Net loss

$

(16,509

)

 

$

(18,956

)

 

$

2,447

 

 

 

 

 

 

Net revenue

Net revenues increased $32.7 million or 20% to $193.2 million during the nine months ended September 30, 2016 compared to net revenues of $160.5 million during the same period in 2015.  The increase to net revenue relates to an increase of $24.9 million in Software segment revenue due to continued focus and investment in selling and marketing efforts of our inContact cloud contact center solutions through our direct sales and referral and reseller partner arrangements.  Network connectivity segment revenue increased $7.8 million as the increase of Network connectivity revenue associated with our inContact cloud software solution customers exceeded the attrition of our Network connectivity-only customers.

Costs of revenue and gross margin

Costs of revenue increased $13.3 million or 17% to $92.2 million during the nine months ended September 30, 2016 compared to $78.9 million for the same period in 2015.  Gross margin increased one percentage point to 52% for the nine months ended September 30, 2016 from 51% for the same period in 2015. Gross margin primarily increased as a result of higher gross margin Software revenue growing more than Network connectivity revenue, which has a comparatively lower gross margin. The growth in Software revenue more than offset greater professional service and customer service personnel related costs from headcount additions to service larger mid-market and enterprise customers and to support resellers, increased software and depreciation expenses related to our additional investments in software, equipment and in the development of our cloud contact center solutions to support current and anticipated customer growth.  The increase in gross margin was also partially offset by increased network connectivity costs related to temporarily duplicated facilities and network connection expenses incurred during the migration of one of our data centers.

Selling and marketing

Selling and marketing expenses increased $5.8 million or 12% to $55.4 million during the nine months ended September 30, 2016 from $49.5 million for the same period in 2015. This increase is primarily a result of increased personnel related costs from headcount additions for direct sales employees and channel sales employees focused on managing and enhancing our partner relationships to support our growth strategy, increased commissions as a result of increased revenue and to a lesser extent higher levels of investment in marketing efforts to create increased awareness of our inContact cloud contact center solutions.

Research and development

Research and development expense increased $6.1 million or 29% to $27.1 million during the nine months ended September 30, 2016 from $21.0 million during the same period in 2015. The increase relates to our efforts to expand our content offerings, upgrade and extend our service offerings and develop new technologies primarily through headcount additions, including the addition of employees from the AC2 and Attensity acquisitions.

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