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SEC Filings

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

The Software segment revenue increased by $7.5 million or 20% to $44.2 million during the three months ended September 30, 2016 from $36.7 million for the same period in 2015. The increase relates primarily to revenue generated from our inContact cloud contact center solutions and is due to our continued focus and investment in sales and marketing through our direct sales and referral and reseller partner arrangements.  

Gross margin decreased two percentage points to 58% for the three months ended September 30, 2016 from 60% for the same period in 2015.  Gross margin decreased primarily as a result of a new supplier agreement related to certain of our resold software services.  It is anticipated this arrangement will be phased out after the merger with NICE-Systems Ltd. is finalized.

We also continue to develop the software applications and services provided in the Software segment by investing in research and development. During the three months ended September 30, 2016, we incurred $8.6 million in direct research and development costs compared to $6.9 million for the same period in 2015 and have capitalized an additional $3.8 million of costs incurred during the three months ended September 30, 2016 related to our internally developed software compared to $3.0 million for the same period in 2015.  

Indirect expenses, which consist of overhead, such as allocated general and administrative expenses, rent, utilities and depreciation on property and equipment, increased $5.2 million or 66% to $13.1 million during the three months ended September 30, 2016 from $7.9 million for the same period in 2015 due to $2.8 million of legal settlement costs, $1.0 million of costs related to professional services, regulatory fees and employee-related expenses incurred in connection with the proposed merger with NICE-Systems Ltd., the general increase in direct expenses, and more indirect costs being allocated to the Software segment with the increasing investment in the Software segment.

Nine Months Ended September 30, 2016 and 2015

The Software segment revenue increased by $24.9 million or 24% to $128.1 million during the nine months ended September 30, 2016 from $103.2 million for the same period in 2015. The increase relates primarily to revenue generated from our inContact cloud contact center solutions and is due to our continued focus and investment in sales and marketing through our direct sales and referral and reseller partner arrangements.  

Gross margin increased one percentage point to 59% for the nine months ended September 30, 2016 from 58% for the same period in 2015.  Gross margin increased primarily as a result of Software revenue growth that was partially offset by 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.  

Direct selling and marketing expenses in the Software segment increased $5.2 million or 12% to $49.9 million during the nine months ended September 30, 2016 compared to $44.7 million for the same period in 2015. The increase in direct selling and marketing expenses in the Software segment is a result of 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.

We also continue to develop the software applications and services provided in the Software segment by investing in research and development. During the nine months ended September 30, 2016, we incurred $25.1 million in direct research and development costs compared to $19.8 million for the same period in 2015 and have capitalized an additional $10.9 million of costs incurred during the nine months ended September 30, 2016 related to our internally developed software compared to $7.5 million for the same period in 2015.  

Indirect expenses, which consist of overhead, such as allocated general and administrative expenses, rent, utilities and depreciation on property and equipment, increased $9.2 million or 36% to $34.9 million during the nine months ended September 30, 2016 from $25.7 million for the same period in 2015 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., $2.8 million of legal settlement costs, the general increase in direct expenses, and more indirect costs being allocated to the Software segment with the increasing investment in the Software segment.

 

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