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SEC Filings

10-Q
INCONTACT, INC. filed this Form 10-Q on 11/09/2016
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General and administrative

General and administrative expense increased $6.6 million or 26% to $32.3 million during the nine months ended September 30, 2016 compared to $25.7 million during the same period in 2015. The increase is due to $2.9 million of costs related to professional services, regulatory fees and employee-related expenses incurred in connection with the proposed merger with NICE-Systems Ltd during the nine months ended September 30, 2016, and $2.8 million of legal settlement costs.

Other expense

Other expense increased $1.3 million to $5.0 million during the nine months ended September 30, 2016 from $3.8 million for the same period in 2015. The increase is primarily due to interest related to the Convertible Notes issued on March 30, 2015.

Income taxes

Benefit (provision) for income taxes, which consists of various state income taxes and foreign taxes, was $2.3 million for the nine months ended September 30, 2016 compared to ($474,000) million for the same period in 2015.  The tax benefit was due to recording a $2.7 million deferred tax liability upon acquisition of AC2 related primarily to the acquisition of intangibles for which no tax benefit will be derived.

SEGMENT REPORTING

We operate under two business segments: Software and Network connectivity. The Software segment includes all monthly recurring revenue related to the delivery of our software solutions plus the associated professional services and setup fees. The Network connectivity segment includes all voice and data long distance services provided to customers.

Management evaluates segment performance based on operating data (revenue, costs of revenue, and other operating expenses). Management does not evaluate and manage segment performance based on assets.

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.

Software Segment Results

The following is a tabular presentation and comparison of our Software segment unaudited condensed consolidated operating results for the three and nine months ended September 30, 2016 and 2015 (in thousands, except percentages):

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2016

 

 

 

2015

 

 

$ Change

 

 

% Change

 

 

 

2016

 

 

 

2015

 

 

$ Change

 

 

% Change

 

Net revenue

$

44,222

 

 

$

36,709

 

 

$

7,513

 

 

 

20%

 

 

$

128,130

 

 

$

103,227

 

 

$

24,903

 

 

 

24%

 

Costs of revenue

 

18,534

 

 

 

14,815

 

 

 

3,719

 

 

 

25%

 

 

 

52,473

 

 

 

42,872

 

 

 

9,601

 

 

 

22%

 

Gross profit

 

25,688

 

 

 

21,894

 

 

 

3,794

 

 

 

 

 

 

 

75,657

 

 

 

60,355

 

 

 

15,302

 

 

 

 

 

Gross margin

 

58

%

 

 

60

%

 

 

 

 

 

 

 

 

 

 

59

%

 

 

58

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct selling and

   marketing

 

17,257

 

 

 

16,075

 

 

 

1,182

 

 

 

7%

 

 

 

49,926

 

 

 

44,729

 

 

 

5,197

 

 

 

12%

 

Direct research and

   development

 

8,617

 

 

 

6,866

 

 

 

1,751

 

 

 

26%

 

 

 

25,065

 

 

 

19,818

 

 

 

5,247

 

 

 

26%

 

Indirect

 

13,146

 

 

 

7,943

 

 

 

5,203

 

 

 

66%

 

 

 

34,872

 

 

 

25,673

 

 

 

9,199

 

 

 

36%

 

Loss from

   operations

$

(13,332

)

 

$

(8,990

)

 

$

(4,342

)

 

 

 

 

 

$

(34,206

)

 

$

(29,865

)

 

$

(4,341

)

 

 

 

 

 

28