UCNN Ucn (MM)

SaaS Segment Revenue Up 31% to Record $5.0 Million SALT LAKE CITY, Nov. 6 /PRNewswire-FirstCall/ -- UCN, Inc. (NASDAQ:UCNN), the leader in all-in-one hosted contact center solutions, today reported financial results for third quarter ended September 30, 2008. THIRD QUARTER 2008 HIGHLIGHTS -- Revenue for the SaaS segment increased 31% to $5.0 million in the third quarter, as compared to $3.8 million in SaaS revenue during the same period in 2007, bringing the total for the first nine months of 2008 to $13.9 million, a 47% increase from $9.5 million in SaaS segment revenue for the same period in 2007. -- EBITDA (earnings before interest, taxes, depreciation and amortization, and stock-based compensation) for the quarter was a positive $62,000, an improvement of $1.4 million compared to a negative $1.3 million in the previous quarter. -- Consolidated revenue for the quarter was $19.8 million, compared to $19.3 million in the previous quarter and $19.6 million in the same period a year ago, bringing the total for the first nine months of 2008 to $59.0 million. -- Consolidated costs of revenue as a percentage of revenue for the quarter improved by 4.0 percentage points to 51.7% from 55.7% in the same period in 2007 and improved by 2.0 percentage points from 53.7% in the previous quarter. -- Signed 43 new SaaS contracts during the quarter, 25 of which were with new companies, while 18 represent an expansion of business within existing customers. -- Telecom segment revenue held steady at $14.8 million as compared to the previous quarter, while costs of revenue as a percentage of revenue was 68.3% in the quarter, an improvement of 1.2 percentage points over the previous quarter. -- The company announced it has received shareholder approval to change its name to inContact(R), Inc., on January 1, 2009, and its common stock will trade under the symbol SAAS. "The investments we have made in our people and processes over the past year delivered strong results in the third quarter," said Paul Jarman, UCN CEO. "All of our key financial indicators showed improvement, and we achieved a substantial productivity gain per sales person and a significant reduction in our implementation time for new accounts. The company is on track for producing similar results in Q4. We expect to continue to benefit from the overall expansion of the SaaS market, which is being driven by companies needing to conserve cash and consolidate their labor force. InContact enables our customers to achieve these business goals, while improving customer loyalty through superior customer service." THIRD QUARTER FINANCIAL RESULTS SaaS Segment Results SaaS segment revenue totaled $5.0 million, an increase of 11% from $4.5 million in the previous quarter and a 31% increase from $3.8 million in the same period in 2007. The SaaS segment includes all monthly recurring revenue related to the delivery of the company's software applications, plus the associated professional services and setup fees related to the software services product features (referred to as SaaS). See discussion of "Segment Reporting" below for further description of the current segment presentation method and segment financial results. Consolidated Results Consolidated revenue for the quarter increased by $0.2 million to $19.8 million, as compared to $19.6 million for the same period in 2007. This reflected an increase of $1.2 million in SaaS segment revenue, which was offset by a decrease of $1.0 million in Telecom segment revenue from expected attrition. Costs of revenue as a percentage of revenue improved by 4.0 percentage points to 51.7% during the quarter, as compared to the same period in 2007. This improvement is due to an increase in higher margin SaaS revenue primarily attributable to the addition of new customers. The company's cost of revenue excludes certain costs such as depreciation and amortization related to the production of revenue. Net loss for the quarter was $2.0 million, or $0.07 per share, as compared to a net loss of $2.0 million or $0.07 per share for the same period in 2007. The loss is attributable, in part, to depreciation and amortization expense of $1.6 million and non-cash stock-based compensation expense of $344,000. The net loss position was also the result of an increased investment in payroll in the areas of general and administrative expenses and research and development, primarily to support the growing SaaS segment. Earnings before interest, taxes, depreciation and amortization, and stock-based compensation (EBITDA) for the third quarter was a positive $62,000 and year-to-date EBITDA was a negative $2.1 million. EBITDA is a non-GAAP measure management believes provides important insight into UCN's operating results (see reconciliation of non-GAAP measures below). CONFERENCE CALL INFORMATION UCN will host a conference call to discuss its third quarter 2008 results later today at 4:30 p.m. Eastern time (1:30 p.m. Pacific) Dial-In Number: 1-800-962-9098 International: 1-785-424-1051 Conference ID#: 7UCN The call will be recorded and accessible as an audio file after the call from UCN's investor page at http://www.ucn.net/investors. A replay of the call will be available via telephone after 7:30 p.m. Eastern time today and until November 13, 2008: Toll-free replay number: 1-800-677-6124 International replay number: 1-402-220-0664 (No replay pass code required) 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 UCN's current expectations, estimates and projections about UCN'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 UCN'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 UCN'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. UCN undertakes no obligation to revise or update publicly any forward-looking statement for any reason. UCN, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) September 30, December 31, 2008 2007 (Unaudited) ASSETS Current assets: Cash and cash equivalents $4,139 $2,760 Short-term investments 700 2,000 Accounts and other receivables, net of allowance for uncollectible accounts of $1,564 and $1,779, respectively 9,215 9,988 Other current assets 776 941 Total current assets 14,830 15,689 Property and equipment, net 7,097 6,375 Intangible assets, net 4,301 6,813 Goodwill 2,685 2,155 Auction rate preferred securities 250 - Other assets 477 336 Total assets $29,640 $31,368 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt and capital lease obligations $791 $781 Trade accounts payable 6,617 7,713 Accrued liabilities 3,311 2,120 Accrued commissions 1,282 1,470 Deferred revenue 875 338 Total current liabilities 12,876 12,422 Long-term debt and capital lease obligations 5,185 746 Other long-term liabilities and deferred revenue 386 172 Total liabilities 18,447 13,340 Total stockholders' equity 11,193 18,028 Total liabilities and stockholders' equity $29,640 $31,368 UCN, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - (Unaudited) (in thousands except per share data) Three months ended September 30, 2008 2007 Revenue $19,803 $19,628 Operating expenses: Costs of revenue (excluding depreciation and amortization shown separately below) 10,242 10,931 Selling and promotion 4,040 3,883 General and administrative 4,757 4,574 Depreciation and amortization 1,609 1,453 Research and development 1,046 674 Total operating expenses 21,694 21,515 Loss from operations (1,891) (1,887) Other income (expense): Interest income 10 3 Interest expense (155) (126) Total other expense (145) (123) Net Loss before income taxes (2,036) (2,010) Income tax benefit/(expense) 3 9 Net loss $(2,039) $(2,019) Net loss per common share: Basic and diluted $(0.07) $(0.07) Weighted average common shares outstanding: Basic and diluted 31,065 28,908 Segment Reporting Effective January 1, 2008, UCN's management changed the way it manages the business and accordingly, UCN has changed the way it reports segments to reflect sales based on its two primary product service segments. The new segments are Software as a Service ("SaaS") and Telecom, which is different than the previously reported Telecom segment. The SaaS segment includes all monthly recurring revenue related to the delivery of our software applications plus the associated professional services and setup fees related to the software services product features (referred to as SaaS). The new SaaS segment no longer includes any telecom revenue. SaaS software includes: -- Skills-based routing, -- Automated call distribution ("ACD"), -- Self-service menus, -- Speech recognition based automated interactive voice response, -- Database integration with the contact handling technology, -- Multimedia contact management (voice, fax, email, chat), -- Management reporting features, -- Performance optimization benchmarking, -- Custom call routing and call flow design, -- Workforce scheduling, simulation and forecasting, -- Customer satisfaction tracking and scoring, -- New hire screening and on-line training tools, and -- One-time professional services and setup fees. Prior to January 1, 2008, UCN managed and reported its financial results based on two customer segments: inContact and Telecom. The inContact segment included all product revenues from customers using any inContact services as well as their long distance voice and data services. The previous Telecom segment included all voice and data long distance services provided to customers not utilizing any inContact services. Operating segment revenues and profitability for the three and nine months ended September 30, 2008 and 2007 were as follows (in thousands): Three months ended September 30, 2008 Telecom SaaS Consolidated Revenue (1) $14,766 $5,037 $19,803 Costs of revenue (excluding depreciation and amortization shown separately below) 10,092 150 10,242 Selling and promotion 1,307 2,733 4,040 General and administrative 3,010 1,747 4,757 Depreciation and amortization 740 869 1,609 Research and development - 1,046 1,046 Loss from operations $(383) $(1,508) $(1,891) Nine months ended September 30, 2008 Telecom SaaS Consolidated Revenue (2) $45,029 $13,940 $58,969 Costs of revenue (excluding depreciation and amortization shown separately below) 30,758 354 31,112 Selling and promotion 4,027 8,493 12,520 General and administrative 9,552 5,830 15,382 Depreciation and amortization 2,177 2,324 4,501 Research and development - 3,082 3,082 Loss from operations $(1,485) $(6,143) $(7,628) Three months ended September 30, 2007 Telecom SaaS Consolidated Revenue (1) $15,795 $3,833 $19,628 Costs of revenue (excluding depreciation and amortization shown separately below) 10,848 83 10,931 Selling and promotion 1,527 2,356 3,883 General and administrative 2,875 1,699 4,574 Depreciation and amortization 741 712 1,453 Research and development - 674 674 Loss from operations $(196) $(1,691) $(1,887) Nine months ended September 30, 2007 Telecom SaaS Consolidated Revenue (2) $49,944 $9,478 $59,422 Costs of revenue (excluding depreciation and amortization shown separately below) 33,403 192 33,595 Selling and promotion 5,183 6,652 11,835 General and administrative 8,764 3,672 12,436 Depreciation and amortization 2,743 1,997 4,740 Research and development - 1,549 1,549 Loss from operations $(149) $(4,584) $(4,733) (1) SaaS segment revenue includes professional services revenue of $266,000 and $388,000 for the three months ended September 30, 2008 and 2007, respectively. (2) SaaS segment revenue includes professional services revenue of $747,000 and $837,000 for the nine months ended September 30, 2008 and 2007, respectively. Reconciliation of Non-GAAP Measures: "EBITDA," which is calculated as Earnings Before deductions for Interest, Taxes, Depreciation and Amortization, and Stock-Based Compensation, is not a measure of financial performance under generally accepted accounting principles (GAAP). EBITDA is provided for the use of the reader in understanding UCN's operating results and is 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 this measure may better enable an investor to form views of UCN's potential financial performance in the future. This measure has limitations as an analytical tool, and investors should not consider EBITDA in isolation or as a substitute for analysis of our results prepared in accordance with GAAP. Three months ended September 30, 2008 2007 Net loss $(2,039) $(2,019) Depreciation and amortization 1,609 1,453 Stock-based compensation 344 387 Interest income and expense, net 145 123 Income tax expense 3 9 EBITDA $62 $(47) Nine months ended September 30, 2008 2007 Net loss $(7,919) $(5,254) Depreciation and amortization 4,501 4,740 Stock-based compensation 1,029 986 Interest income and expense, net 282 507 Income tax expense 9 14 EBITDA $(2,098) $993 DATASOURCE: UCN, Inc. CONTACT: Aaron Glauser, Communications Director of UCN, Inc., +1-801-320-3468, ; or Investors, Scott Liolios or Ron Both, both of Liolios Group Inc, +1-949-574-3860, , for UCN, Inc. Web site: http://www.ucn.net/

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