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inContact, Inc. (NASDAQ:SAAS)

Q1 2010 Earnings Call Transcript

May 6, 2010 4:30 pm ET

Executives

Paul Jarman – CEO

Greg Ayers – EVP and CFO

Frank Maylett – EVP, Sales and Global Alliances

Analysts

Mark Schappel – Benchmark Capital

Nathan Schneiderman – Roth Capital

Gregg Speicher – 451 Group

Mark [ph] – Craig-Hallum

Mark Matheson – Raymond James

Operator

Good day, ladies and gentlemen. Conference is now online in a listen-only mode. Please note today’s conference maybe recorded. I’m now turning the program over to our moderator for today, the CEO of inContact, Paul Jarman. Please go ahead, sir.

Paul Jarman

Thank you. Good afternoon. This is Paul Jarman, CEO of inContact. Welcome to our first quarter 2010 conference call. Greg Ayers, our CFO, will present the Safe Harbor statement, followed by our financial results for the quarter. I will then cover a few highlights since our last call including new customer wins, key management hires and I will then elaborate on our growth plans to increase marketing and lead generation that I briefly touched on in our last call. Frank Maylett, EVP of Sales will then join Greg and I for Q&A.

Greg Ayers

Thank you, Paul and good afternoon everyone. Let me begin this call with the Safe Harbor statement. The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for forward-looking statements made on the company's behalf. All statements, other than statements of historical facts, which address the company's expectations of sources of capital or which express the company's expectation for the future, with respect to financial performance or operating strategies can be identified as forward-looking statements.

Such statements made by the company are based on the knowledge of the environment in which it operates, but because of the factors previously stated, as well as other factors beyond the control of the company, actual results may differ materially from the expectations expressed in the forward-looking statements.

During today's call, I will first recap the definitions for our two operating segments, software and telecom. I will then cover our Q1 operating segment and consolidated results, as well as other financial highlights. First quarter financials and comparisons can be found in our news release that went out this afternoon and in our first quarter 10-Q. For access to the news release and other information on inContact, please visit our website at www.incontact.com.

Our first segment is the software segment, which includes all monthly recurring revenue related to the delivery of our software applications as well as associated professional services and setup fees. The software segment does not include any Telecom revenue. For Q1 2010, I am pleased to report that our software segment revenue increased to $8.3 million which represents a 22% increase or $1.5 million over the $6.8 million in Q1 2009. This progress is attributable to three key drivers of our software revenue.

First is existing customer retention. Our Q1 software revenue retention remains consistent with our 2009 software revenue retention rate of approximately 92%. The second driver is the variable utilization of software services by existing customers that fluctuates due to seasonality, customer service activities and macroeconomic conditions as well as the revenue generated from the sale of additional services to existing customers.

The measurement of this revenue growth is similar in concept to the retail industry's use of the same-store sales metric. In other words, it excludes attrition and new customer contract revenue. With these existing customers, we experienced approximately 3% growth in Q1 2010 compared to approximately 5% growth for Q1 2009. The quarter-to-quarter variability in this metric that we experienced in 2009 is expected to continue in 2010. Also in comparison to 2009, the lower quarterly percentage growth should be expected in 2010 as the base of existing customers continues to grow in absolute dollar terms.

The third and last driver of our software revenue growth is new customer service revenue. We closed 33 new contracts in the quarter, of which 24 came from new customers and nine were upsells in existing accounts.

The Q1 2010 software segment gross margin was 67.3% versus 58.2% in Q1 '09. This decrease in gross margin is primarily attributable to higher depreciation and network operations costs as a result of this step function of placing additional technology assets in the service since Q1 ‘09. We remain confident in our ability to leverage our multi-tenant architecture and establish customer service infrastructure as our software segment customer base grows.

The non-cash costs included in the cost of software revenue totaled approximately nine percentage points. Thus excluding non-cash charges such as depreciation, amortization and stock-based compensation, results in a software segment gross margin of about 76%.

Our second segment is the Telecom segment, which includes all voice and long distance services provided to both our Telecom-only legacy customers as well as to our software segment customers. Telecom segment revenue for Q1 2010 was $12.8 million compared to $14.2 million in Q1 '09. This decrease is related to the expected attrition of our Telecom-only legacy customers.

It’s important to note that in contrast to the decrease in revenue, the Telecom segment gross profit and gross margin increased $135,000 and 380 basis points respectively in comparison to Q1 of ‘09. Telecom revenue generated by software customers represented approximately 35% of total Telecom revenue.

Our consolidated results for Q1 are as follows. Consolidated revenue increased to $21.1 million, a $118,000 increase from Q1 '09. This revenue increase was driven entirely by our software segment. Gross profit increased $1.1 million in Q1 2010 over Q1 '09. Gross margin percentage increased to 44% in the first quarter compared to 39% for the same period in ‘09.

The 5% improvement is attributable to our continuing transition and revenue mix from lower margin Telecom segment revenue to higher margin software segment revenue as a result of increased sales of our inContact software as well as gross margin improvement in the Telco segment.

Operating expenses were $7.9million, down $1.6 million from Q1 ‘09. The decrease is attributable to our efforts to reduced overhead cost in Q4 of last year, one-time savings in Q1 of 2010 as personnel changes were made and one-time expenses incurred in Q1 of ‘09. The operating results for the quarter were benefited by non-recurring personnel expense savings of $371,000.

Net results were $1.5 million of net income or $0.04 per share for Q1 2010 as compared to a $1.7 million loss or $0.05 per share for Q1 '09. The net results for the quarter were benefited by the one-time operating expense benefit of $371,000 mentioned above and a gain of $184,000 attributable to the change in fair value of warrants.

Now, federal income tax expenses then reflected given our net operating loss carryforwards at quarter end. EBITDAS, which is a non-GAAP measure, is an important metric of our operating results, due to the significant amount of depreciation and amortization resulting primarily from previous acquisitions of software products, customer bases and network technology, as well as stock-based compensation.

Q1 2010 EBITDAS was $3.1 million, which represents a $3 million improvement over Q1 '09. This is the seventh consecutive quarter of positive EBITDAS and the seventh consecutive quarter of EBITDAS growth. Acquisition related amortization amounted to $146,000 during the quarter.

As a result of producing more than $2.6 million in cash from operations for the quarter and our successful December equity financing as of March 31, 2009, we had $10.6 million in cash. In addition, we had access to available borrowings of an additional $2.7 million under our revolving credit facility, resulting in total cash and availability of $13.3 million at quarter-end. This is the highest level of cash and availability, we’ve had in years.

In summary, the company is on solid financial footing. Cash basis gross margins in the software segment continue to expand. Increased cash flow enables us to reduce interest bearing debt. In short, we have the financial flexibility to aggressively grow the business and do so within our current capital structure. Now to Paul.

Paul Jarman

Thanks Greg. As you can see in our financial results Greg just reported, in the first quarter, we continue to make solid progress with respect to increasing our reoccurring revenue, expanding our gross profit dollars, leveraging our operating expenses and significantly improving our income from operations. We started the year off at a good pace with a total of 33 new contracts in the quarter of which 24 came from new customers and nine were upsells in existing accounts.

Let me give you some insight into few of these wins and customer expansions that we achieved this quarter. We continue to successfully help our customers solve the costs and quality challenges they face in their contact centers. They accomplish this by achieving the operating efficiencies that are possible with our software platforms.

Recently, we expanded our presence within a large global imaging and networking technology companies. The company began using our call routing, ECHO, eLearning and workforce management solutions in one division last year. Once their call center management experienced a benefit, scalability and quick implementation of our on demand call center software, they championed the inContact Solution to three other divisions, most recently to the company’s support group with a 120 agents.

The support division had suffered with long haul times and inefficient routing due to the three different phone systems in its call centers that didn’t integrate with one another forcing the company to use three recording, monitoring and routing systems. The inContact platform solved these problems. This capability is a key differentiator for inContact versus our competitors.

It is very common within many of our customers to expand in a new divisions, increasing a number of agents using our solutions and growing the number of products or solutions being used within an organization.

Next, based on our referral from an existing customer, we signed one of the world’s largest providers of business outsourcing solutions that will use our ECHO survey product. More than 100 other company’s 600 agents will be able to hear the voice of the customers through inContact satisfaction surveys which helped management to improve service.

Much like the last example, this is a great new opportunity to cross sell additional products and expand our presence and more fees [ph]. For the past year, we have been providing our coaching and eLearning products to our global outsource call center provider with over 25,000 agents.

We began working with them in their at-home agent program and based on that very successful implementations, those same products are now being implemented in one of the companies many brick-and-mortar operations. InContact has proven to be a particularly well suited to meet the needs of outsourcers due to our flexibility and scalability.

We can implement our solution quickly at one site or group of sites and scale our solutions to meet their needs so they only pay for what they use. These capabilities are a key differentiator for the inContact versus our competitors which lack our platform architecture and network capability. There are significant opportunities for growth in this account and with outsourcers in general.

These examples of recent new customer wins and expansions are typical of how we continue to grow our presence through providing proven products, services and customer support. Now, I’d like to share some specific examples of how we’ve created value for our customers through tangible savings and greatly improved efficiencies and productivity within their organization.

Support.com of premium remote technology services provider switched to an at-home model utilizing call routing solutions from inContact just over a year ago. With the flexibility to hire any one, anywhere, the company can recruit top talents regardless of geography while benefiting from three merit contact handling software that gives supervisors and agents the same tools and capabilities as if they were all in one location.

After switching to inContact in the at-home model, this company has been able to grow significantly over the past year and hence acknowledge saving an estimated $3.4 million in annual productivity costs versus our brick-and-mortar center with an on-premise solution.

Hall automotive, a group of Ford team, multifranchise autodealerships wanted to streamline customer interactions and enhance the overall cutomer experience, particularly for customer shopping at multiple Hall Automotive dealerships. The company had a number of different CRM system that did not operate together and as a result hindered the call centered experience.

Hall integrated the inContact system with all the CRM systems in the auto group as well as the company’s multiple backup systems. The result was a single customer information center capable of advance coordinated contact which actually improved their customer relationship and increased productivity by 350% in part by cutting the price per call from $0.83 to $0.23.

Frontline Call Center, an outsource customer support provider, struggled for a year to host its lessening provider and was plagued with problems ranging from excessive system downtime to an adequate reporting software. With ambitious stroke plans, it was obvious that the company needed to make a change.

Within two years, after switching to inContact, the company had tripled revenues impart to increase in agent utilization from 40% to 78%. These customer example show our strength in several of the key growth areas for our company and our workers, multiple location operators and outsourcers. These customers are telling their stories which demonstrate how they achieve meaningful change to their businesses through use of inContact.

As you know, we worked hard over the past years to build this company. We’ve developed an innovative solution, established a strong presence in our targeted markets and achieved a leadership position within the cloud based contact center market.

We have grown software revenue for 12 consecutive quarters and have been profitable for the last two. A key part of building the company has been enhancing our senior management team.

Let me briefly review some of the key leadership positions, we have recently filled. Neeraj Sen as Vice President, Research and Development. Neeraj has extensive software experience including leadership engineering positions with Kronos, IBM and GTE Internetworking. Neeraj is under reputation for delivering quality, market leading products on schedule and on budget.

Bassam Salem as Senior Vice President, Professional Services joined us from Omniture where he established the company’s first implementation consulting organization, run at the profit center and achieved world class profitability targets. Bassam will guide the inContact Professional Services team and set the organization’s customer support and revenue generation strategy.

Mariann McDonagh as Chief Marketing Officer who was instrumental in the explosive growth of Verint Systems, a provider of call center workforce optimization products that grew from $150 million to $650 million of revenue in just five years. As Senior Vice President at Verint, she ran the marketing and partnered channel groups. Mariann brings significant global call center and software industry experience to inContact as well as deep demand generation, channel management and brand enhancement strategies.

We have been able to attract this level of talent to our company largely because of the recent company successes and significant growth potential they see in us. These executives have proven track records with their respective fields and with their vast experience with high-growth companies, will be instrumental in key areas that will leverage our future success.

During the past 18 months, we focused significant resources on building our next generation platform. The result of this investment have further increased our competitive advantages and will provide our customers the tool, fast and functionality they want.

So where are we today? And what are reasonable expectations for the foreseeable future? For the past few quarters, we have been growing software revenues steadily at a rate of approximately $3000 to $5000 per quarter and for over the past year, we have kept our selling and marketing expenses at a consistent level.

The careful management of selling marketing and other expenses has enabled us to drive the company to profitability and position us financially to now be more aggressive then we’re in a new business. We are adding important inflection point with momentum building from our reference customers, partners, next generation platform and improving economy and a growing acceptance of cloud computing in the contact center.

We have proven our ability to help our customers to be successful. With these factors in place, our principle constraints to accelerating the current software revenue growth rate has been creating awareness of our company and a capabilities of our solutions in the market. We are now prepared to create significant additional awareness and increased lead flow within our target markets through enhanced targeted marketing activities and accelerated partner channel development.

Mariann will play a primary role in leading this charge, leveraging our previous successes in marketing, lead generation and building a strong partner channel. I want everyone to understand that when we talk about enhanced targeted marketing, we’re accelerating efforts in areas that are already proven to increase lead flow.

We are creating integrated marketing campaigns that include activity such as partner marketing, on volume marketing, industry events and outbound lead generation. We are also focusing on using public relations as a growth strategy to expand thought leadership and awareness by building on the foundation we’ve already established.

We have found our partner channels to be an important source of awareness and qualified lead generation. We will leverage our current partner relationships and continue to aggressively grow our partner ecosystem of CRM providers, long distance resellers and PBX and VoIP providers, system integrators, Wares [ph] and expand our joint marketing efforts with VAM [ph].

We are implementing a well-thought out, properly timed and measured effort, designed to take software revenue growth to a meaningful higher level that brings us to the rest of the plan. Increased marketing generates increased lead flow, leads are converted to qualified opportunities which are turned over to the sales teams

As the sales team has had larger numbers of qualified leads this month, the number of new contracts, increase in revenues grow. It typically takes three to four months for the entire sales process to conclude. From generating a lead through closing a sale, once the sale is closed, it is generally 45 days to implementing contact system for a new customer and then another month before we recognize the revenue.

Our enhanced marketing activities began in the end of March and are now shifting into high gear. Even though we just recently began these marketing efforts, I’m pleased to tell you that we are already seeing positive results. As I discussed in our last call, we will add to the sales team, only when we feel we have maximized current capacity and can leverage additional sales people into incremental revenue. This plays into our goal a balance in increased awareness and marketing while remaining prudent in our spending in order to maintain the leverage, we have demonstrated in our model.

Taking all of this into account, I’m confident that by late summer and early autumn, we will see tangible results in the form of additional opportunities than a marked increase in new customer wins, which will then translate into accelerating revenue in the following quarters.

In the meantime, we remain confident that we can continue to deliver solid progress across the company as we continue to executing on this plan. In closing, we have recorded another strong quarter of progress and performance. We have significant market opportunity before us and are both confident and excited about the progress of inContact. Thank you for your continued support. Frank, Greg and I will now take your questions.

Question-and-Answer Session

Operator

(Operator Instructions) It looks like our first comes from the site of Mark Schappel from Benchmark Capital. Please go ahead.

Mark Schappel – Benchmark Capital

Hi, good evening. Paul, starting with you, in the past your call routing products have made up somewhat in Europe about 85% of your software product mix. I was wondering if that was the case this quarter?

Paul Jarman

That would be very close to correct. So it typically been about 85%. I know, it is pretty similar to this quarter.

Mark Schappel – Benchmark Capital

Okay. Good. So, with respect to guidance, which your Telco business showing some stability in operating expenses have shown some of the course of being under control here, why not introduce some of your top or bottom line guidance help us read out a little bit?

Paul Jarman

Yeah. It’s a great, great question and we are as we worked through these opportunities that we’re working on right now relating to the marketing awareness, we will be preparing to do more guidance. I will say this we are comfortable that, the actions that we will take will first keep the run rate or the growth percentage consistent and then we’ll start moving ahead [ph] towards the end of the year and end of ‘11.

Mark Schappel – Benchmark Capital

Okay. Great. And Telco revenue, it was expected, I believe, mid year to end of this year to start to stabilize, yet it looks like there is some early indications of that happening in the March quarter. Am I reading that correctly or jump in a kind of little bit here?

Paul Jarman

You know, we had a good first quarter for Telecom with just only a change of $100,000 in actual revenues and really the positive in cash was $100,000. So we are optimistic but I don’t want to say that we’re finally done with that staying completely constant but it was a good first quarter and we’re optimistic for the next three.

Mark Schappel – Benchmark Capital

Okay. Great. Greg, you did not touch the cash flow from operations in your prepared remarks. Could you repeat that?

Greg Ayers

Yeah. Cash flow from operations was about $2.6 million.

Mark Schappel – Benchmark Capital

Thank you. That’s all from me.

Operator

Next, we’ll go to the site of Nathan Schneiderman from Roth Capital. Please go ahead.

Nathan Schneiderman – Roth Capital

Hi. Paul, Greg and Frank. Thanks very much for taking my questions. Just to drill down a little bit, Paul on your comments about thoughts on how the business might develop going forward? You had mentioned that in recent quarters, shown revenue growth of $300,000 to $500,000 on the sequential basis. I gather from your comments that you still feel like that’s the appropriate phase of development for the next couple of quarters. First of all, is it benefits of your marketing (inaudible).

Paul Jarman

I would take this. We’ve seen over the last three quarters that we’re between three and five. This quarter, a little over four, the quarter before that about five and then the quarter before that it was around 350. So our expectation is, is that over the next couple of quarters, usually our conference quarter has been second just from a seasonality perspective. It takes backup in third and then a higher quadrant, fourth. We would expect it to be somewhat similar this year. But if you’ve to take those three quarters and average them, they would be three to five or better across the average absolutely.

Nathan Schneiderman – Roth Capital

Okay. That’s helpful. And would that be predicated on flattish results in Telecom.

Paul Jarman

May be up in different way.

Nathan Schneiderman – Roth Capital

I’m sorry. This is just the 300 to 500, it’s just the software side of business.

Paul Jarman

Yeah. It’s just software. That’s right.

Nathan Schneiderman – Roth Capital

Got it. Got it. Got it. And then, Paul, you made a number of comments about investing and in the marketing area that try to improve lead gen which will ultimately lead to more deals than more revenue. But what on a dollar basis, what’s the step function up that you envision for sales and marketing expenses in Q2 relative to the $4.1 million this quarter.

Paul Jarman

So let me say this. Last quarter, we talked about increasing sales in marketing by 10% for the year. It’s about $1.8 million for the year and probably two-thirds of that is marketing. That would be spread fairly, evenly between our next three quarters.

Nathan Schneiderman – Roth Capital

Okay. That 1.8, you are talking about, is that, you’re just looking at – actually last year was about $17 million, so you envisioned that sales and marketing expense for the year would be $18.5 million or so. Is that what you are saying?

Paul Jarman

That’s 10% over 9. So that sounds you to that right.

Nathan Schneiderman – Roth Capital

Got it. And then, Greg, question for you. To a non-recurring expenses of nearly $400,000 this quarter, what was – what did they show up in the line items?

Greg Ayers

So I’ll answer to second question, first. They are spread throughout the operating expenses as well as cost of software and Telco revenue and the reason for that made is if it was principally related to personnel cost and so obviously, we are personnel in all of those line items. They were principally related to a change in our time of policy so that – such that we had a net reduction, kind of, a one-time reduction in Q1 as well as some management changes with regard to personnel and then a stock option expense reversal.

Nathan Schneiderman – Roth Capital

Okay. And so we’re basically just reset this quarter. Correct.

Greg Ayers

Okay.

Nathan Schneiderman – Roth Capital

And then Greg, could you give us ending headcount, ending Q1 headcount and also how many reps did you end – sales reps did you end the quarter with?

Greg Ayers

Yeah. So the ending headcount is 290.

Nathan Schneiderman – Roth Capital

Okay.

Greg Ayers

And 20 reps.

Nathan Schneiderman – Roth Capital

Okay. And then on headcount and reps, what’s your hiring plan for the second quarter in the balance of the year?

Greg Ayers

We would be keeping the reps constant in second and then as we continue to accelerate the opportunity that we began back in March, we would basically be adding some potentially in third and fourth to cover the additional opportunity that we create and that could be anywhere from probably two or 10 based on advance need we have to add them in place before the end of before those opportunities yet.

Nathan Schneiderman – Roth Capital

Okay. And outside of the sales reps, the other 270 employees that you have, do you see hiring in that area as well?

Greg Ayers

There probably could be 10 or 15 at service. At service, people come in for additional revenue and things like that but it wouldn’t be a significant number.

Nathan Schneiderman – Roth Capital

Got it. And Frank, final question for you. I was just hoping you could give us an update on the competitive environment. May be when you discuss that if you could share with us the number of times you’ve seen the new joint Cisco Salesforce.com solution if you’ve seen it well. Thanks very much?

Frank Maylett

You got me. So in the competitive landscape, it hasn’t changed much from last quarters’ analyst call. We’ve gone through probably 200 sales opportunities during the quarter and competitors are involved in many of the – we're seeing lot of the same one showing up. But as far as the Cisco Salesforce combination, we’re not seeing that as a competitor yet in the marketplace. So we are not having any issues with that relationship.

Paul Jarman

I would say Nathan, we usually are competing against the premise players, usually Avaya, Nortel, sometimes Cisco but mostly Avaya and Nortel.

Greg Ayers

Yeah. Agreed. And it was handful of small technology companies that always seems to kind of surface and go away. And like I said that’s been really from the Cisco Salesforce relationship.

Nathan Schneiderman – Roth Capital

Got it. Thank you very much.

Paul Jarman

Thanks Nat.

Operator

Our next question comes from the site of Greg Speicher from the 451 Group. Please go ahead.

Gregg Speicher – 451 Group

Hey guys. So Paul, you were talking about sort of a sale cycle from lead gen to close. When does the Telco revenue enter into that? Is that something you are regularly trying to talk to customers about? Is it kind of add on or does it flow the cycle down? Can you just sort of help us understand how that plays in?

Paul Jarman

Yeah. So think it this way, Gregg, normally when we bring a dollar of software around, we bring about $0.50 to Telco and it can’t be at the same time.

Gregg Speicher – 451 Group

Okay. I mean, is there a high-standard deviation of customers to take Telco or not or to develop or take firm or is it kind of just variable?

Paul Jarman

I would say 85% of new customers and upsells stake telecom.

Gregg Speicher – 451 Group

Okay. Great. Great. And then I guess of the 24 new deals. How many were like based on outsourcers, how many were using for at-home or just general contact center issue? Do you have that breakout?

Paul Jarman

Do you mean if there is a new contract not the upsells?

Gregg Speicher – 451 Group

That’s correct.

Paul Jarman

Okay. I would guess the outsourcers were around 20%, 25% and then I would say goods 40% or 50% is somehow related to at-home or multi-location and then the others would be just other types of mid market service or division to larger companies. So in the verticals, the two most common things we see is the outsourcers or the characteristic that have at-home or multi-location opportunities.

Gregg Speicher – 451 Group

Okay. Great. And sort of, with all this new activity that are going on, do you have any new modules or plans for this year, any new modules coming out?

Paul Jarman

We do. So our next release is in July. Okay. And in that release, we will start working on some additional thing such as screen recording, a little later in the year, we will be working on thing such as analytics and some other upgrades and thesis to other products.

Gregg Speicher – 451 Group

Okay. Great. Thank you very much.

Paul Jarman

Thanks.

Operator

Next, we’ll go to the site of Jeff Van Rhee from Craig-Hallum. Please go ahead.

Mark – Craig-Hallum

Hey guys. This is Mark [ph] on behalf of Jeff. Just two quick questions. First on the partner side, can you give us some update on what the interest from the partner side has been? Have you seen a pick up in these partnerside? Does any sort of commentary around how is that (inaudible) is nothing?

Paul Jarman

So first of all, we have a good percentage of partner deals in the first quarter. We saw good opportunities come from our Telco Partners, good opportunities come from the CRM partners such as Salesforce and others and we’re seeing really most of the pipeline opportunities from each of the different partners are increasing. So this next week, we have a webinar with Astadia within our vision, lot of aging [ph] alliance decision makers and that’s going nicely for us. We’ve done a lot of participation in this Salesforce event and events were working with their teams in the product area and also just building a joint pipelines. So there has been good – really we are very pleased theree and we’ve also seen additional interest in other partners who were starting to say, how do I participate in the cloud and that will be more of the integrator to the Wares, who in past, we’ve not participated in the cloud much because of their business model. But there have been a lot of conversation recently where that seems like a budgeting opportunity for us.

Mark – Craig-Hallum

Okay. Are you – is it fair to say then that activity levels that partners are sort of flat from prior quarter or are they increasing?

Paul Jarman

I’d say they are increasing. So increasing as to the percentage of the pipeline and increasing as to our interaction with them?

Mark – Craig-Hallum

Okay. And can you just quantify like you did last quarter, what percentage of the deepness for partner?

Paul Jarman

It’s wrapped at 20%

Mark – Craig-Hallum

Okay. And then, I guess, lastly on the marketing front, you said you had begun some of the initiative back in March. Have you – have you sort of figured out some way to communicate the returns on those marketing initiative? Will we get some more color on those in the coming quarters?

Paul Jarman

Well, I think what we can do for is, first of all, I hope you understand the increase in opportunities and opportunities in our world is basically what goes into the pipeline that they have a budgeted decision maker and a project in the timeline and then that flows into our funnel. So our first thing, we’re starting to see is more opportunities and then obviously, you will see the measurement that they hit in the closed contracts and in the revenues. But yet, we can give you a feel for the progress that we’re making as we talk through the year, absolutely.

Frank Maylett

This is Frank. Let me go back to your questions. I think I may have given you the wrong percentage for the question you asked. Excuse me – on the quarter side, we did about 20% of the closed deals were from partners, which was up from Q4 but nearly 40% of the revenue, meaning that the value of the deals was greater from the partners. So that’s the number that you probably had coming out of Q4 was close to the 40%.

Mark – Craig-Hallum

Revenues from new customers last quarter as well as this quarter, were there how many positivities, is that…?

Paul Jarman

Yeah. 40% revenues and I’m trying to sent deals.

Mark – Craig-Hallum

Okay. Thank you. That’s all I had.

Paul Jarman

Thanks.

Operator

And it looks like we have time for one more question this afternoon. It comes from site of Mark Matheson from Raymond James. Please go ahead.

Mark Matheson – Raymond James

Hi. Huge kudos gentlemen – ladies and gentlemen for your earnings for the quarter. Thank you so much for putting out some profit. We appreciate that. We appreciate your control of your cost that’s very easy to let that go out of control when you are growing your business. So thank you Greg and Paul for the good work. Appreciate it.

Paul Jarman

Thanks.

Greg Ayers

Thank you.

Mark Matheson – Raymond James

And thank you for also not starting to decrease last year for us. So we appreciate that. Just to clarify going forward with the ratcheting up of the marketing campaign where we see a big jump in marketing experience in Q2 over Q1?

Paul Jarman

You are not going to see a huge jump because we started in the end of March and so it could be a couple of $100,000 but it's not – we're not putting ads on the Super Bowl here. And so it’s really going to be like we said, they’re very programmatic, aggressive working in the proven channels that we’re using now and it just putting more velocity against it. So you will see it speed up a little bit in third and fourth as we see the best returns and keep going through what we already have done. So I think what I painted also as we’ve seen that, it’s very impressive for us to increase marketing because the leverage to the Salesforce means we increased our lot more revenue per dollar spend and if we had to just hire a lot more sales people so we look at it as a nice way to leverage growth without having to really leverage a lot of sales cost in the model.

Mark Matheson – Raymond James

Can you be more specific about what channels you’re using. Are we talking print or internet or tradeshows or white paper? What do you really spend in the marketing dollars at what channels?

Paul Jarman

So like we said a little bit in the talk, we talked about internet marketing, we talked about co-marketing with some of our key partners. By next week, we have a webinar with Astadia and a magazine TMC. You’ll see its work with some additional lead generation people who are performing cold calling and other activities for us into the targeted areas that we’re the most excited about. You’ll see us do more white papers, you will see us in some of the key industry events with more frequency. And you will see us do more email campaigns and work with targeting the message into these areas that we’re really excited about. So that’s a lot of it and we will just do it with greater frequency and force and really just kind of muscle it up.

Mark Matheson – Raymond James

Okay. Last, clarifying what you mentioned that Astadia, is that the borrower that works mainly with – Cisco already work with.

Paul Jarman

Yeah. Astadia is one of the premiere partners for Salesforce. So they put lot of their integration and kind of work around turning the Salesforce customers up and we’ve got a great partnership with them and we work with them in Salesforce in some of these deals.

Mark Matheson – Raymond James

So that shows the things are going really well with Salesforce, if you have that kind of relationship with them and you are not worried about Salesforce partnering with up anyone else and continuing to anything you’re doing?

Paul Jarman

Well, what’s good for us is we’re excited that we’re winning deals together and those deals are helping us and them and if you are training and working with their sales team and everything else, we look at that relationship as a very good one for us, yes.

Mark Matheson – Raymond James

Okay. Great. Thanks for giving a greater quarter.

Paul Jarman

Well, thanks. Thanks Mark and I mean, it sounds like that was the last question. Thank you for everybody’s interest and support of the company and thanks for your time today.

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