Interactive Intelligence Reports Fourth-Quarter and Full Year 2012 Financial Results

Interactive Intelligence Reports Fourth-Quarter and Full Year 2012 Financial Results

  • Total orders for the fourth quarter up 119 percent from 2011 fourth quarter; 2012 total orders up 48 percent year-over-year.

  • Cloud-based orders for the fourth quarter up 311 percent year-over-year; 2012 cloud-based orders up 123 percent year-over-year.

  • Cloud-based orders in 2012 were 35 percent of total orders, up from 23 percent in 2011.

  • Recurring revenues in 2012 increased 27 percent year-over-year to 50 percent of total revenue.

INDIANAPOLIS--(BUSINESS WIRE)-- Interactive Intelligence Group Inc. (NAS: ININ) , a global provider of unified IP business communications solutions, has announced financial results for the fourth quarter and full year ended Dec. 31, 2012.

"Our strong performance during the fourth quarter led to a record year for orders and revenues," said Interactive Intelligence founder and CEO, Dr. Donald Brown. "In 2012, we have further extended our product leadership position and gained even more momentum in cloud-based offerings, which is the fastest growing segment of the contact center market. The number of our new cloud-based customers reached record levels in the fourth quarter and the total dollar amount of contracts continues growing at a rate significantly higher than the overall market.


"While continuing to add some of the most recognized global companies as customers, we remain committed to maintaining our pace of innovation, with several new products scheduled for release this year," continued Brown. "Looking forward, given our strong global pipeline of opportunities, we are reaffirming our 2013 total order growth forecast of 20 percent and expect cloud-based orders to represent approximately 50 percent of total 2013 orders. We remain focused on innovation, product leadership and cloud-based growth and are confident in our long-term financial profile, which will be driven by growth in recurring revenues."

Fourth Quarter 2012 Financial Highlights:

  • Orders: Total orders grew by 119 percent from the fourth quarter of 2011, while cloud-based orders were up 311 percent over the fourth quarter of 2011 and comprised 39 percent of total orders. The company signed 68 contracts over $250,000, which included 19 orders over $1.0 million, up from 37 and six, respectively, in the fourth quarter of 2011.

  • Revenues: Total revenues were $70.5 million, an increase of 22 percent over the fourth quarter of 2011. Recurring revenues, which include both maintenance and support from perpetual license agreements and cloud-based revenues, increased 31 percent to $33.1 million and accounted for 47 percent of total revenues. Cloud-based revenues increased 47 percent to $6.6 million. Product revenues were $27.2 million and services revenues were $10.2 million, compared to $26.5 million and $6.0 million, respectively, in the fourth quarter of 2011.

  • Total Deferred Revenues: Deferred revenues increased to $91.9 million as of Dec. 31, 2012, from $75.4 million as of Dec. 31, 2011. In addition, the amount of unbilled future cloud-based revenues as of Dec. 31, 2012 increased to $89.5 million from $34.6 million as of Dec. 31, 2011. The combination of deferred revenues and unbilled future cloud-based revenues was $181.4 million, up 65 percent from $110.0 million as of Dec. 31, 2011.

  • Operating Income: GAAP operating income was $3.5 million for the fourth quarter of 2012, compared to $6.5 million in the fourth quarter of 2011. Non-GAAP* operating income was $5.9 million for the fourth quarter of 2012, with a non-GAAP operating margin of 8.4 percent, compared to $8.7 million and a non-GAAP operating margin of 15.0 percent in the fourth quarter of 2011. The year-over-year decline in operating income resulted from the deferral of revenues due to an increase in cloud-based orders, certain premises-based orders received in the fourth quarter of 2012 for which revenues were deferred to future periods, and the increased investment in sales, marketing, and research and development to expand the company's product leadership and share in the cloud-based market.

  • Net Income: GAAP net income for the fourth quarter of 2012 was $2.3 million, or $0.11 per diluted share based on 20.3 million weighted average diluted shares outstanding. This compares to GAAP net income for the same quarter in 2011 of $4.6 million, or $0.23 per diluted share based on 19.9 million weighted average diluted shares outstanding.

    Non-GAAP net income for the fourth quarter of 2012 was $5.7 million, or $0.28 per diluted share. This compares to non-GAAP net income of $7.3 million, or $0.37 per diluted share for the same quarter in 2011.

  • Cash, Cash Equivalents and Investments: As of Dec. 31, 2012, we had cash, cash equivalents and investments of $80.6 million.

  • Cash Flows: During the fourth quarter of 2012, the company generated $3.6 million in cash flow from operations and used $2.9 million for capital expenditures, which included expansion of its cloud infrastructure.

Full Year 2012 Financial Highlights:

  • Orders: Total orders increased 48 percent in 2012 compared to 2011, while cloud-based orders were up 123 percent year-over-year. The company signed 158 contracts over $250,000, which included 42 orders over $1.0 million, up from 113 and 17, respectively, in 2011. Cloud-based orders were 35 percent of total orders, up from 23 percent in 2011.

  • Revenues: Total revenues were $237.4 million in 2012, an increase of 13 percent over 2011. Recurring revenues increased 27 percent to $118.3 million. Cloud-based revenues increased 54 percent year-over-year to $22.0 million. Product revenues were $88.6 million and services revenues were $30.4 million in 2012, compared to $92.8 million and $23.4 million, respectively, in 2011.

  • Operating Income: GAAP operating income in 2012 was $1.1 million, compared to $21.6 million in 2011. Non-GAAP operating income in 2012 was $10.2 million, with a non-GAAP operating margin of 4.3 percent, compared to $29.3 million and a non-GAAP operating margin of 13.9 percent in 2011. The year-over-year decline in operating income resulted from deferral of revenues due to an increase in cloud-based orders, certain premises-based orders received in 2012 for which revenues were deferred to future periods, and the increased investment in sales, marketing, and research and development to expand the company's product leadership and share in the cloud-based market.

  • Net Income: GAAP net income was $906,000, or $0.04 per diluted share based on 20.2 million weighted average diluted shares outstanding. This compares to GAAP net income in 2011 of $14.8 million, or $0.74 per diluted share based on 19.9 million weighted average diluted shares outstanding. The annual effective tax rate was 46 percent and includes a tax reserve on certain tax positions of the company, offset by one-time benefits recorded in 2012 principally related to a change in the company's treatment of its officer compensation.

    Non-GAAP net income was $10.1 million, or $0.50 per diluted share, compared to non-GAAP net income in 2011 of $24.9 million, or $1.25 per diluted share.

  • Cash Flows: During the full year of 2012, the company generated $20.0 million in cash flow from operations, used $22.7 million for acquisitions, and used $15.6 million for capital expenditures, which included expansion of its cloud infrastructure.

* A reconciliation of GAAP to non-GAAP financial measures has been provided in the financial statement tables included with this press release. An explanation of these measures is also included below under the heading "Non-GAAP Measures."

Additional Fourth-Quarter 2012 and Recent Highlights:

  • Interactive Intelligence was honored with a 2012 Cloud Computing Excellence Award from TMC's Cloud Computing Magazine.

  • Interactive Intelligence launched Interaction Mobilizer for Windows 8, a software platform that enables mid-size to large contact centers and enterprises to rapidly deploy customer service applications for tablets and other mobile devices.

  • Interactive Intelligence released Interaction Dialer® version 4.0, a major predictive dialer software upgrade which was designed to improve ease-of-use, simplify management, and help contact centers more effectively execute dialing campaigns.

  • The company launched an e-commerce website, the Interactive Intelligence Marketplace, giving customers and resellers fast and easy access to products that complement the vendor's all-in-one IP communications software suite.

Interactive Intelligence will host a conference call today at 4:30 p.m. Eastern time (EST) featuring Dr. Brown and the company's CFO, Stephen R. Head. A live Q&A session will follow opening remarks.

To access the teleconference, please dial 1 877.324.1969 at least five minutes prior to the start of the call. Ask for the teleconference by the following name: "Interactive Intelligence fourth-quarter earnings call." The teleconference will also be broadcast live on the company's investor relations' page at http://investors.inin.com. An archive of the teleconference will be posted following the call.

About Interactive Intelligence

Interactive Intelligence Group Inc. (NAS: ININ) is a global provider of contact center, unified communications, and business process automation software and services. The company's unified IP business communications solutions, which can be deployed on-premise or via the cloud, are ideal for industries such as financial services, insurance, outsourcers, collections, and utilities. Interactive Intelligence was founded in 1994 and has more than 5,000 customers worldwide. The company is among Forbes Magazine's 2011 Best Small Companies in America and Software Magazine's 2012 Top 500 Global Software and Service Providers. It employs approximately 1,400 people and is headquartered in Indianapolis, Indiana. The company has offices throughout North America, Latin America, Europe, Middle East, Africa and Asia Pacific. Interactive Intelligence can be reached at +1 317.872.3000 or info@inin.com; on the Net: www.inin.com.

Non-GAAP Measures

The non-GAAP measures shown in this release include revenue which was not recognized on a GAAP basis due to purchase accounting adjustments and exclude non-cash stock-based compensation expense, the amortization of certain intangible assets related to acquisitions by the company and non-cash income tax expense. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included with the financial information included in this press release. These measures are not in accordance with, or an alternative for, GAAP and may be different from non-GAAP measures used by other companies. Stock-based compensation expense and amortization of intangibles related to acquisitions are non-cash and certain amounts of income tax expense are non-cash. Management believes that the presentation of non-GAAP results, when shown in conjunction with corresponding GAAP measures, provides useful information to management and investors regarding financial and business trends related to the company's results of operations. Further, management believes that these non-GAAP measures improve management's and investors' ability to compare the company's financial performance with other companies in the technology industry. Because stock-based compensation expense, non-cash income tax expense amounts and amortization of intangibles related to acquisitions can vary significantly between companies, it is useful to compare results excluding these amounts. Management also uses financial statements that exclude stock-based compensation expense related to stock options, non-cash income tax amounts and amortization of intangibles related to acquisitions for its internal budgets.

Forward Looking Statements

This release may contain certain forward-looking statements that involve a number of risks and uncertainties. Among the factors that could cause actual results to differ materially are the following: rapid technological changes in the industry; the company's ability to maintain profitability; to manage successfully its growth; to manage successfully its increasingly complex third-party relationships resulting from the software and hardware components being licensed or sold with its solutions; to maintain successful relationships with certain suppliers which may be impacted by the competition in the technology industry; to maintain successful relationships with its current and any new partners; to maintain and improve its current products; to develop new products; to protect its proprietary rights adequately; to successfully integrate acquired businesses; and other factors described in the company's SEC filings, including the company's latest annual report on Form 10-K.

Interactive Intelligence is the owner of the marks INTERACTIVE INTELLIGENCE, its associated LOGO and numerous other marks. All other trademarks mentioned in this document are the property of their respective owners.

Interactive Intelligence Group, Inc.

Condensed Consolidated Statements of Income

(in thousands, except per share amounts)

Three Months Ended

Year Ended

December 31,

December 31,

2012

2011

2012

2011

(unaudited)

(unaudited)

(unaudited)

Revenues:

Product

$

27,207

$

26,538

$

88,626

$

92,786

Recurring

33,120

25,186

118,343

93,363

Services

10,215

5,951

30,396

23,377

Total revenues

70,542

57,675

237,365

209,526

Costs of revenues:

Product

6,742

5,818

24,329

25,095

Recurring

9,053

6,227

32,227

23,801

Services

6,796

4,600

22,868

16,389

Amortization of intangible assets

58

35

163

140

Total cost of revenues

22,649

16,680

79,587

65,425

Gross profit

47,893

40,995

157,778

144,101

Operating expenses:

Sales and marketing

23,172

18,339

79,770

63,039

Research and development

12,386

9,522

45,682

35,626

General and administrative

8,312

6,284

29,722

22,729

Amortization of intangible assets

494

306

1,521

1,066

Total operating expenses

44,364

34,451

156,695

122,460

Operating income

3,529

6,544

1,083

21,641

Other income:

Interest income, net

207

134

772

434

Other income (expense)

(123

)

(118

)

(189

)

144

Total other income

84

16

583

578

Income before income taxes

3,613

6,560

1,666

22,219

Income tax expense

1,343

1,965

760

7,421

Net income

$

2,270

$

4,595

$

906

$

14,798

Other comprehensive income:

Foreign currency translation adjustment

$

129

$

710

$

(645

)

$

(73

)

Net unrealized investment gain (loss)

(191

)

(89

)

163

93

Comprehensive income

$

2,208

$

5,216

$

424

$

14,818

Net income per share:

Basic

$

0.12

$

0.24

$

0.05

$

0.79

Diluted

0.11

0.23

0.04

0.74

Shares used to compute net income per share:

Basic

19,367

18,908

19,241

18,714

Diluted

20,308

19,850

20,162

19,885

Interactive Intelligence Group, Inc.

Reconciliation of Supplemental Financial Information

(in thousands, except per share amounts)

Unaudited

Three Months Ended

Year Ended

December 31,

December 31,

2012

2011

2012

2011

Recurring revenue, as reported

$

33,120

$

25,186

$

118,343

$

93,363

Purchase accounting adjustments

178

309

522

471

Non-GAAP recurring revenue

$

33,298

$

25,495

$

118,865

$

93,834

Recurring revenue gross profit as reported

$

24,067

$

18,959

$

86,116

$

69,562

Purchase accounting adjustments

178

309

522

471

Non-cash stock-based compensation expense

135

89

523

422

Non-GAAP recurring revenue gross profit

$

24,380

$

19,357

$

87,161

$

70,455

Non-GAAP recurring revenue gross margin

73.2

%

75.9

%

73.3

%

75.1

%

Services revenue, as reported

$

10,215

$

5,951

$

30,396

$

23,377

Purchase accounting adjustments

-

6

-

54

Non-GAAP services revenue

$

10,215

$

5,957

$

30,396

$

23,431

Services revenue gross profit as reported

$

3,419

$

1,351

$

7,528

$

6,988

Purchase accounting adjustments

-