Last night, inContact (SAAS) delivered 3Q results that matched consensus estimates for total revenue, software revenue and GAAP EPS. Interestingly, customer utilization rebounded nicely from the prior quarter and bookings growth of 35% came in stronger than expected driven by solid field sales execution and accelerating partner activity.
All in all, the 3Q earnings report represents a reasonable rebound from the disappointing 2Q, when the company missed consensus estimates for total revenue, software revenue, and lowered 2013 guidance. Regarding the larger picture, we think the big investor concerns remain: 1) longer product implementation cycles, particularly with bigger deals, 2) ongoing partner momentum, particularly Siemens and 3) the perception of dramatically increased competition, particularly with regards to Interactive Intelligence, Five9s and to a lesser extent Genesys and ShoreTel. While we believe it is necessary to look for more data points on these, we also think it is important for SAAS to consistently show a return to the tight, predictable execution that has been its hallmark.
Average deal sizes grew 20% sequentially and 57% y/y; there are 15 customers billing over $500K annually in software revenue, up two sequentially; and there were 71 new contract wins, consisting of 52/19 new/upsell customers vs. 50/19 last year. On the partner front, partners generated 25% of total deals in the quarter, led principally by Verizon. On the downside, management acknowledged that Siemens (now Unify) continues to run behind plan and likely won’t meet its contracted take-or-pay amount by the end of 2014, which will begin pressuring SAAS’s annual revenue growth in 4Q14.