Interactive Intelligence Reports Second-Quarter 2013 Financial Results

Interactive Intelligence Reports Second-Quarter 2013 Financial Results

• Total orders up 115 percent from 2012 second quarter

• Cloud-based orders quadruple and were 64 percent of total orders

• Total revenues up 39 percent to $76.2 million

INDIANAPOLIS--(BUSINESS WIRE)-- Interactive Intelligence Group Inc. (NAS: ININ) , a global provider of software and services designed to improve the customer experience, has announced financial results for the three and six months ended June 30, 2013.

"The market is now definitively recognizing how Interactive Intelligence takes enterprises' customer service experiences to new levels," said Interactive Intelligence Founder and CEO Dr. Donald Brown. "Demand for our solutions remained strong in the quarter as we executed particularly well in the North America and Asia Pacific regions. Our exceptional year-over-year increase in total orders was driven by a more than 400 percent increase in cloud-based orders, which included the signing of the largest contract in the company's history."

Brown added: "While continuing to drive up-market with our best-in-class contact center solutions for the enterprise, we recently expanded our product footprint with the introduction of our cloud-based CaaS Small Center℠ offering specifically designed for contact centers with under 50 agents. Considering our strong performance in the quarter and outlook for continued order growth, we remain confident in our long-term business strategy to increase recurring revenues, consistently grow faster than the overall market, and lead the contact center's migration to the cloud."

Second Quarter 2013 Financial Highlights:

• Orders: Total orders increased by 115 percent from the second quarter of 2012, with cloud-based orders up 469 percent over the second quarter of 2012 to comprise 64 percent of total orders. The company signed 43 contracts over $250,000, including 14 over $1 million, up from 36 and 8 orders in the second quarter of 2012, respectively.

• Revenues: Total revenues were $76.2 million, an increase of 39 percent over the second quarter of 2012. Recurring revenues, which include support fees from on-premises license agreements and fees from cloud-based solutions, increased 24 percent to $35.1 million and accounted for 46 percent of total revenues. Cloud-based revenues increased 56 percent to $7.9 million. Product revenues were $27.9 million and services revenues were $13.2 million, up 42 percent and 97 percent, respectively, compared to the second quarter of 2012.

• Total Deferred Revenues: Deferred revenues increased to $108.3 million as of June 30, 2013, from $78.8 million as of June 30, 2012. In addition, the amount of unbilled future cloud-based revenues increased to $136.0 million from $49.7 million at the end of the 2012 second quarter. The combination of deferred revenues and unbilled future cloud-based revenues was $244.3 million, up 90 percent from $128.5 million as of June 30, 2012.

• Operating Income: GAAP operating income was $849,000 for the second quarter of 2013, compared to a loss of $1.8 million in same quarter last year. Non-GAAP* operating income was $3.8 million for the second quarter of 2013, with a non-GAAP operating margin of 5.0 percent, compared to $391,000 and 0.7 percent, respectively, in the second quarter of 2012.

• Net Income: Preliminary GAAP net income for the second quarter of 2013 was $1.2 million, or $0.06 per diluted share based on 20.9 million weighted average diluted shares outstanding. These results compare to GAAP net loss of $1.1 million, or $0.06 per diluted share, based on 19.2 million weighted average diluted shares outstanding for the same quarter in 2012.
  
  Preliminary Non-GAAP net income for the second quarter of 2013 was $2.9 million, or $0.14 per diluted share, compared to non-GAAP net income of $580,000, or $0.03 per diluted share, for the same quarter in 2012.
  
  The final determination of the company's GAAP and non-GAAP net income and earnings per diluted share is subject to the completion of the company's tax provision. The company expects the preparation of its tax provision to be completed by the filing of its Quarterly Report on Form 10-Q. The preliminary GAAP and non-GAAP net income and earnings per diluted share in this release could change materially.

• Cash, Cash Equivalents, and Investments: As of June 30, 2013, cash, cash equivalents, and investments were $87.4 million.

• Cash Flows: The company generated $13.6 million in cash flow from operating activities in the second quarter of 2013 and used $9.3 million for capital expenditures, which included expansion of cloud infrastructure to support growth. In addition, $1.9 million was received during the quarter from the exercise of stock options.

* 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."

Six Months Ended 2013 Financial Highlights:

• Orders: Total orders increased by 78 percent from the first six months of 2012, with cloud-based orders up 262 percent over the first six months of 2012 to comprise 54 percent of total orders. The company signed 82 contracts over $250,000, including 22 over $1 million, up from 53 and 14 in the first six months of 2012, respectively.

• Revenues: Total revenues were $149.5 million, an increase of 39 percent over the first six months of 2012. Recurring revenues increased 23 percent to $68.9 million and accounted for 46 percent of total revenues. Cloud-based revenues increased 49 percent to $15.0 million. Product revenues were $55.9 million and services revenues were $24.6 million, up 43 percent and 99 percent, respectively, compared to the first six months of 2012.

• Operating Income: GAAP operating income was $4.3 million for the first six months of 2013, compared to a loss of $1.5 million over same period last year. Non-GAAP operating income was $10.0 million for the first six months of 2013, with a non-GAAP operating margin of 6.7 percent, compared to $2.8 million and 2.6 percent, respectively, during the same period last year.

• Net Income: Preliminary GAAP net income for the first six months of 2013 was $2.6 million, or $0.13 per diluted share based on 20.8 million weighted average diluted shares outstanding. These results compare to a GAAP net loss of $919,000, or $(0.05) per diluted share based on 19.2 million weighted average diluted shares outstanding for the same period in 2012. Preliminary GAAP net income for the six months ended June 30, 2013 includes an income tax benefit related to a change in the company's approach to current year transfer pricing for its foreign subsidiaries and the 2012 U.S. Federal research tax credit of $600,000 recognized in the first quarter of 2013.
  
  Preliminary Non-GAAP net income for the first six months of 2013 was $6.5 million, or $0.31 per diluted share, compared to non-GAAP net income of $2.4 million, or $0.13 per diluted share for the same period in 2012.
  
  See our comment under the second quarter financial highlights regarding the completion of the tax provision.

Additional Second Quarter 2013 and Recent Highlights:

• Interactive Intelligence was once again positioned in the "Leaders" quadrant in Gartner's 2013 Magic Quadrant for Contact Center Infrastructure report.

• The company received the 2013 IP Contact Center Technology Pioneer Award from CUSTOMER Magazine for its cloud-based CaaS Small Center℠ solution.

• Interactive Intelligence released a major upgrade to its debt collection software suite, Latitude Center^™, which can be deployed in the cloud or on-premises, and gives creditors, collection agencies, and debt buyers of all sizes a single-vendor source to manage all aspects of their debt collection and recovery process.

• The company had record attendance at its annual global Interactions 2013 conference, drawing more than 1,800 attendees from 35 countries.

Interactive Intelligence will host a conference call today at 4:30 p.m. Eastern time (EDT) 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 second-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 designed to improve the customer experience. The company's solutions, which can be deployed via the cloud or on-premises, 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 Software Magazine's 2013 Top 500 Global Software and Service Providers, and is the recipient of TMC's Cloud Computing Magazine's 2012 Cloud Computing Excellence Award. It has received Frost & Sullivan's Company of the Year Award, Contact Center Systems, North America, for the last two consecutive years. Interactive Intelligence employs more than 1,500 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, exclude non-cash stock-based compensation expense and the amortization of certain intangible assets related to acquisitions by the company, and adjust for non-GAAP 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 non-GAAP income tax expense is pro forma based on non-GAAP earnings. 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, our 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 and amortization of intangibles related to acquisitions amounts can vary significantly between companies, it is useful to compare results excluding these amounts. Our management also reviews financial statements that exclude stock-based compensation expense and amortization of intangibles amounts 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.