Interactive Intelligence Reports Fourth-Quarter and Full Year 2013 Financial Results
| - | | 2013 total orders up 30 percent year-over-year. |
| - | | Cloud-based orders for 2013 up 87 percent year-over-year. |
| - | | Cloud-based orders in 2013 were 50 percent of total orders, up from 35 percent in 2012. |
| - | | Total 2013 revenues up 34 percent year-over-year to $318.2 million. |
| - | | Deferred and unbilled future cloud-based revenues up 65 percent year-over-year. |
INDIANAPOLIS, Jan. 29, 2014 -- Interactive Intelligence Group Inc. (Nasdaq: ININ), a global provider of software and services designed to improve the customer experience, has announced financial results for the fourth quarter and full year ended Dec. 31, 2013.
“2013 was an excellent year for Interactive intelligence,” said Interactive Intelligence founder and CEO, Dr. Donald Brown. “We significantly increased orders, revenues, earnings and cash, while continuing to gain share and recognition in the contact center market. More than ever, many of the world’s largest companies are turning to us to deliver solutions that optimize the customer experience.”
Brown added, “Looking forward, we are very optimistic about our position in the marketplace based on the breadth and strength of our offering. We remain committed to innovation, and plan to continue investing in research and development, as well as in our sales infrastructure. Based on our strong global pipeline of opportunities, we’re expecting 2014 total order growth of 20 percent or more, which is on top of our better-than-expected 2013 order growth of 30 percent. In addition, we anticipate cloud-based total order growth to outpace that number, and to represent approximately 55 to 60 percent of total 2014 orders.”
Fourth-Quarter 2013 Financial Highlights:
| - | | Revenues: Total revenues for the fourth quarter were $90.8 million, up 29 percent from the 2012 fourth quarter. Recurring revenues, including support fees from on-premises license agreements and fees from cloud-based customers increased 25 percent to $41.5 million and accounted for 46 percent of total revenues. Cloud-based revenues increased 61 percent to $10.6 million. Product revenues were $34.9 million, and services revenues were $14.4 million, compared to $27.2 million and $10.2 million, respectively, in the fourth quarter of 2012. |
| - | | Orders: Cloud-based orders comprised 47 percent of total orders in the fourth quarter, up from 39 percent of total orders during the same period last year. Total orders for the fourth quarter decreased by 15 percent year-over-year due to the comparison to an exceptionally strong 2012 fourth quarter. The company signed 63 contracts over $250,000, including 15 over $1.0 million, compared to 68 orders over $250,000, including 19 over $1.0 million in the same quarter last year. |
| - | | Total Deferred Revenues: Deferred revenues increased to $116.0 million, up from $91.9 million as of Dec. 31, 2012. In addition, the amount of unbilled future cloud-based revenues increased to $184.2 million from $89.6 million at the end of the fourth quarter of 2012. The combination of deferred revenues and future cloud-based revenues was $300.0 million, up 65 percent from $181.5 million as of Dec. 31, 2012. |
| - | | Operating Income: GAAP operating income was $6.5 million for the fourth quarter, compared to $3.5 million in the fourth quarter of 2012. Non-GAAP* operating income was $9.3 million for the fourth quarter of 2013, with a non-GAAP operating margin of 10.2 percent, compared to $5.9 million and a non-GAAP operating margin of 8.4 percent in the fourth quarter of 2012. Both GAAP and non-GAAP operating income during the fourth quarter of 2013 include a $1.8 million reduction of expense related to the capitalization of development costs for internal use software as Interactive Intelligence continues to develop its cloud offering. |
| - | | Income Taxes: Income tax expense for the fourth quarter was $2.9 million and resulted in an annual effective rate of 27 percent. |
| - | | Net Income: GAAP net income for the fourth quarter was $3.5 million, or $0.17 per diluted share based on 21.4 million weighted average diluted shares outstanding. This compares to GAAP net income for the same quarter in 2012 of $2.3 million, or $0.11 per diluted share based on 20.3 million weighted average diluted shares outstanding. |
Non-GAAP net income for the fourth quarter was $5.6 million, or $0.26 per diluted share. This compares to non-GAAP net income of $5.7 million, or $0.28 per diluted share for the same quarter in 2012.
| - | | Cash, Cash Equivalents and Investments: Cash, cash equivalents and investments totaled $107.8 million as of Dec. 31, 2013, up from $80.6 at the end of 2012. |
Full Year 2013 Financial Highlights:
| - | | Revenues: Total revenues were $318.2 million, an increase of 34 percent over 2012. Recurring revenues increased 25 percent to $148.0 million, including cloud-based revenues, which increased 55 percent year-over-year to $34.2 million. In 2013, product revenues were $117.7 million, and services revenues were $52.6 million, compared to $88.6 million and $30.4 million, respectively, in 2012. |
| - | | Orders: Total orders increased 30 percent in 2013 compared to 2012, with cloud-based orders up 87 percent year-over-year. The company signed 192 contracts over $250,000, which included 48 orders over $1.0 million, up from 158 and 42, respectively, in 2012. Cloud-based orders were 50 percent of total orders, up from 35 percent in 2012. |
| - | | Operating Income: GAAP operating income in 2013 was $14.4 million, compared to $1.1 million in 2012. Non-GAAP operating income in 2013 was $26.0 million, with a non-GAAP operating margin of 8.1 percent, compared to $10.2 million and a margin of 4.3 percent in 2012. Both GAAP and non-GAAP operating income during 2013 include a $3.6 million reduction of expense related to the capitalization of development costs for internal use software as Interactive continues to develop its cloud offering. |
| - | | Income Taxes: Income tax expense for the full year of 2013 was $3.6 million. The annual effective rate of 27 percent is lower than the expected rate, primarily as a result of research and development tax credits. |
| - | | Net Income: GAAP net income was $9.5 million, or $0.45 per diluted share based on 21.1 million weighted average diluted shares outstanding. This compares to GAAP net income in 2012 of $906,000, or $0.04 per diluted share based on 20.2 million weighted average diluted shares outstanding. |
Non-GAAP net income was $16.7 million, or $0.79 per diluted share, compared to non-GAAP net income in 2012 of $10.1 million, or $0.50 per diluted share.
| - | | Cash Flows: During the full year of 2013, the company generated $27.4 million in cash flow from operations, and used $20.8 million for capital expenditures and $6.1 million for internal use software. |
* 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 2013 and Recent Highlights:
| - | | Interactive Intelligence’s cloud offering achieved the highest PCI (Payment Card Industry) Data Security Standard level of validation. |
| - | | Interactive Intelligence’s all-in-one IP communications software suite achieved Lync 2013 qualification for interoperability with Microsoft® Lync™ Server. |
| - | | Interactive Intelligence received Miercom's Performance Verified Certification of its contact center and unified communications software. |
| - | | TMC’s Cloud Computing Magazine honored Interactive Intelligence with its 2013 Cloud Computing Excellence Award. |
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. (Nasdaq: 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 has received a Frost & Sullivan Company of the Year Award for the last four consecutive years. In addition, Glassdoor honored Interactive Intelligence with its 2014 Employees’ Choice Award as one of the Best Places to Work in the U.S., and Mashable ranked Interactive Intelligence second on its 2014 list of the Seven Best Tech Companies to Work For. Interactive Intelligence employs more than 1,800 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. Visit the company on the Web at www.inin.com; on Twitter at www.inin.com/twitter; on Facebook at www.inin.com/facebook; or on LinkedIn at www.inin.com/linkedin.
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.
ININ-G
Contacts:
Stephen R. Head
Chief Financial Officer
Interactive Intelligence
+1 317.715.8412
steve.head@inin.com
Seth Potter
Investor Relations
ICR, Inc.
+1 646.277.1230
seth.potter@icrinc.com
Christine Holley
Senior Director of Market Communications
Interactive Intelligence
+1 317.715.8220
christine.holley@inin.com###
| | | | | | | | |
Interactive Intelligence Group, Inc. |
Condensed Consolidated Statements of Income and Comprehensive Income |
(in thousands, except per share amounts) |
(unaudited) |
| | | | | | | | |
| | | | | | | | |
| | Three Months Ended | | Year Ended |
| | December 31, | | December 31, |
| | 2013 | | 2012 | | 2013 | | 2012 |
| | | | | | | | |
Revenues: | | | | | | | | |
Product | | $ 34,895 | | $ 27,207 | | $ 117,708 | | $ 88,626 |
Recurring | | 41,471 | | 33,120 | | 147,941 | | 118,343 |
Services | | 14,419 | | 10,215 | | 52,585 | | 30,396 |
Total revenues | | 90,785 | | 70,542 | | 318,234 | | 237,365 |
Costs of revenues: | | | | | | | | |
Costs of product | | 7,542 | | 6,742 | | 29,233 | | 24,329 |
Costs of recurring | | 13,781 | | 9,053 | | 45,865 | | 32,227 |
Costs of services | | 11,444 | | 6,251 | | 38,760 | | 21,099 |
Amortization of intangible assets | | 49 | | 58 | | 196 | | 163 |
Total costs of revenues | | 32,816 | | 22,104 | | 114,054 | | 77,818 |
Gross profit | | 57,969 | | 48,438 | | 204,180 | | 159,547 |
Operating expenses: | | | | | | | | |
Sales and marketing | | 29,228 | | 23,717 | | 102,873 | | 81,539 |
Research and development | | 12,357 | | 12,386 | | 50,397 | | 45,682 |
General and administrative | | 9,459 | | 8,312 | | 34,651 | | 29,722 |
Amortization of intangible assets | | 467 | | 494 | | 1,862 | | 1,521 |
Total operating expenses | | 51,511 | | 44,909 | | 189,783 | | 158,464 |
Operating income | | 6,458 | | 3,529 | | 14,397 | | 1,083 |
Other income (expense): | | | | | | | | |
Interest income, net | | 215 | | 207 | | 833 | | 772 |
Other expense | | (291) | | (123) | | (2,142) | | (189) |
Total other income (expense) | | (76) | | 84 | | (1,309) | | 583 |
Income before income taxes | | 6,382 | | 3,613 | | 13,088 | | 1,666 |
Income tax expense | | 2,852 | | 1,343 | | 3,573 | | 760 |
Net income | | $ 3,530 | | $ 2,270 | | $ 9,515 | | $ 906 |
Other comprehensive income: | | | | | | | | |
Foreign currency translation adjustment | | $ (567) | | $ 129 | | $ (907) | | $ (645) |
Net unrealized investment gain (loss) - net of tax | | 56 | | (191) | | (94) | | 163 |
Comprehensive income | | $ 3,019 | | $ 2,208 | | $ 8,514 | | $ 424 |
| | | | | | | | |
Net income per share: | | | | | | | | |
Basic | | | | | | | | |
Diluted | | $ 0.17 | | $ 0.12 | | $ 0.47 | | $ 0.05 |
| | 0.17 | | 0.11 | | 0.45 | | 0.04 |
| | | | | | | | |
Shares used to compute net income per share: | | | | | | | | |
Basic | | 20,360 | | 19,367 | | 20,033 | | 19,241 |
Diluted | | 21,377 | | 20,308 | | 21,088 | | 20,162 |
| | | | | | | | |
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, |
| | 2013 | | 2012 | | 2013 | | 2012 |
| | | | | | | | |
Recurring revenue, as reported | | $ 41,471 | | $ 33,120 | | $ 147,941 | | $ 118,343 |
Purchase accounting adjustments | | 10 | | 178 | | 202 | | 522 |
Non-GAAP recurring revenue | | $ 41,481 | | $ 33,298 | | $ 148,143 | | $ 118,865 |
| | | | | | | | |
Recurring revenue gross profit as reported | | $ 27,690 | | $ 24,067 | | $ 102,076 | | $ 86,116 |
Purchase accounting adjustments | | 10 | | 178 | | 202 | | 522 |
Non-cash stock-based compensation expense | | 218 | | 135 | | 806 | | 523 |
Non-GAAP recurring revenue gross profit | | $ 27,918 | | $ 24,380 | | $ 103,084 | | $ 87,161 |
Non-GAAP recurring revenue gross margin | | 67.3% | | 73.2% | | 69.6% | | 73.3% |
| | | | | | | | |
Services revenue gross profit as reported | | $ 2,975 | | $ 3,964 | | $ 13,825 | | $ 9,297 |
Non-cash stock-based compensation expense | | 60 | | 27 | | 245 | | 147 |
Non-GAAP services revenue gross profit | | $ 3,035 | | $ 3,991 | | $ 14,070 | | $ 9,444 |
Non-GAAP services revenue gross margin | | 21.0% | | 39.1% | | 26.8% | | 31.1% |
| | | | | | | | |
Total revenue, as reported | | $ 90,785 | | $ 70,542 | | $ 318,234 | | $ 237,365 |
Purchase accounting adjustments | | 10 | | 178 | | 202 | | 522 |
Non-GAAP total revenue | | $ 90,795 | | $ 70,720 | | $ 318,436 | | $ 237,887 |
| | | | | | | | |
Gross Profit | | $ 57,969 | | $ 48,438 | | $ 204,180 | | $ 159,547 |
Revenue adjustments | | 10 | | 178 | | 202 | | 522 |
Acquired technology | | 49 | | 58 | | 196 | | 163 |
Non-cash stock-based compensation expense | | 278 | | 162 | | 1,051 | | 670 |
Non-GAAP gross profit | | $ 58,306 | | $ 48,836 | | $ 205,629 | | $ 160,902 |
Non-GAAP gross margin | | 64.2% | | 69.1% | | 64.6% | | 67.6% |
| | | | | | | | |
Operating income, as reported | | $ 6,458 | | $ 3,529 | | $ 14,397 | | $ 1,083 |
Purchase accounting adjustments | | 526 | | 769 | | 2,308 | | 2,487 |
Non-cash stock-based compensation expense | | 2,291 | | 1,650 | | 9,247 | | 6,677 |
Non-GAAP operating income | | $ 9,275 | | $ 5,948 | | $ 25,952 | | $ 10,247 |
Non-GAAP operating margin | | 10.2% | | 8.4% | | 8.1% | | 4.3% |
| | | | | | | | |
|
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, |
| | 2013 | | 2012 | | 2013 | | 2012 |
Net income, as reported | | $ 3,530 | | $ 2,270 | | $ 9,515 | | $ 906 |
Purchase accounting adjustments: | | | | | | | | |
| | | | | | | | |
Increase to revenues | | 10 | | 178 | | 202 | | 522 |
Reduction of operating expenses: | | | | | | | | |
Customer Relationships | | 422 | | 449 | | 1,682 | | 1,341 |
Technology | | 49 | | 58 | | 196 | | 163 |
Non-compete agreements | | 45 | | 46 | | 180 | | 180 |
Acquisition Costs | | - | | 38 | | 48 | | 281 |
Total | | 526 | | 769 | | 2,308 | | 2,487 |
Non-cash stock-based compensation expense: | | | | | | | | |
Cost of recurring revenues | | 218 | | 135 | | 806 | | 523 |
Cost of services revenues | | 60 | | 27 | | 245 | | 147 |
Sales and marketing | | 663 | | 543 | | 3,109 | | 2,250 |
Research and development | | 735 | | 510 | | 2,733 | | 1,886 |
General and administrative | | 615 | | 435 | | 2,354 | | 1,871 |
Total | | 2,291 | | 1,650 | | 9,247 | | 6,677 |
Non-GAAP income tax expense adjustment | | (765) | | 1,039 | | (4,388) | | - |
Non-GAAP net income | | $ 5,582 | | $ 5,728 | | $ 16,682 | | $ 10,070 |
| | | | | | | | |
Diluted EPS, as reported | | $ 0.17 | | $ 0.11 | | $ 0.45 | | $ 0.04 |
Purchase accounting adjustments | | 0.02 | | 0.04 | | 0.11 | | 0.12 |
Non-cash stock-based compensation expense | | 0.11 | | 0.08 | | 0.44 | | 0.34 |
Non-GAAP income tax expense adjustment | | (0.04) | | 0.05 | | (0.21) | | - |
Non-GAAP diluted EPS | | $ 0.26 | | $ 0.28 | | $ 0.79 | | $ 0.50 |
| | | | |
Interactive Intelligence Group, Inc. |
Condensed Consolidated Balance Sheets |
(in thousands) |
| | | | |
| | |
| | December 31 | | December 31 |
| | 2013 | | 2012 |
Assets | | (unaudited) | | |
Current assets: | | | | |
Cash and cash equivalents | | $ 65,881 | | $ 45,057 |
Short-term investments | | 32,162 | | 23,816 |
Accounts receivable, net | | 80,414 | | 68,409 |
Deferred tax assets, net | | 23,684 | | 16,600 |
Prepaid expenses | | 21,989 | | 15,565 |
Other current assets | | 13,566 | | 5,958 |
Total current assets | | 237,696 | | 175,405 |
Long-term investments | | 9,787 | | 11,757 |
Property and equipment, net | | 36,919 | | 26,816 |
Goodwill | | 37,298 | | 38,723 |
Intangible assets, net | | 20,613 | | 22,676 |
Other assets, net | | 10,912 | | 6,419 |
Total assets | | $ 353,225 | | $ 281,796 |
| | | | |
Liabilities and Shareholders' Equity | | | | |
Current liabilities: | | | | |
Accounts payable | | $ 8,727 | | $ 8,796 |
Accrued liabilities | | 15,162 | | 19,608 |
Accrued compensation and related expenses | | 17,494 | | 13,640 |
Deferred product revenues | | 10,412 | | 5,999 |
Deferred services revenues | | 81,630 | | 67,893 |
Total current liabilities | | 133,425 | | 115,936 |
Long-term deferred revenues | | 23,914 | | 18,000 |
Deferred tax liabilities, net | | 2,388 | | 99 |
Other long-term liabilities | | 4,140 | | 3,644 |
Total liabilities | | 163,867 | | 137,679 |
| | | | |
Shareholders' equity: | | | | |
Preferred stock | | - | | - |
Common stock | | 205 | | 194 |
Additional paid-in-capital | | 170,075 | | 133,359 |
Accumulated other comprehensive loss | | (1,676) | | (675) |
Retained earnings | | 20,754 | | 11,239 |
Total shareholders' equity | | 189,358 | | 144,117 |
Total liabilities and shareholders' equity | | $ 353,225 | | $ 281,796 |
| | | | |
Interactive Intelligence Group, Inc. |
Condensed Consolidated Statements of Cash Flows |
(in thousands) |
|
| | | | |
| | Years Ended |
| | December 31, |
| | 2013 | | 2012 |
| | (unaudited) |
Operating activities: | | | | |
Net income | | $ 9,515 | | $ 906 |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | |
Depreciation | | 11,664 | | 8,547 |
Amortization | | 2,058 | | 1,776 |
Other non-cash items | | 1,442 | | (906) |
Stock-based compensation expense | | 9,247 | | 6,677 |
Tax benefits from stock-based payment arrangements | | (13,479) | | (1,586) |
Deferred income tax | | (4,795) | | (12,311) |
Amortization (accretion) of investment premium (discount) | | (37) | | 846 |
Loss on disposal of fixed assets | | - | | 74 |
Changes in operating assets and liabilities: | | | | |
Accounts receivable | | (12,005) | | (10,166) |
Prepaid expenses | | (6,178) | | (4,490) |
Other current assets | | 737 | | (975) |
Accounts payable | | (69) | | 5,072 |
Accrued liabilities | | 1,233 | | 11,940 |
Accrued compensation and related expenses | | 3,854 | | 4,400 |
Deferred product revenues | | 4,284 | | 1,190 |
Deferred services revenues | | 19,645 | | 12,850 |
Other assets and liabilities | | 259 | | (2,976) |
Net cash provided by operating activities | | 27,375 | | 20,868 |
| | | | |
Investing activities: | | | | |
Sales of available-for-sale investments | | 26,803 | | 58,235 |
Purchases of available-for-sale investments | | (33,270) | | (30,348) |
Purchases of property and equipment | | (20,758) | | (15,554) |
Capitalized internal use software cost | | (6,112) | | (862) |
Acquisitions, net of cash | | (725) | | (22,651) |
Unrealized gain on investment | | 34 | | (138) |
Net cash used in investing activities | | (34,028) | | (11,318) |
| | | | |
Financing activities: | | | | |
Proceeds from stock options exercised | | 14,122 | | 5,029 |
Proceeds from issuance of common stock | | 837 | | 680 |
Tax withholding on restricted stock awards | | (961) | | (253) |
Tax benefits from stock-based payment arrangements | | 13,479 | | 1,586 |
Net cash provided by financing activities | | 27,477 | | 7,042 |
Net increase in cash and cash equivalents | | 20,824 | | 16,592 |
Cash and cash equivalents, beginning of period | | 45,057 | | 28,465 |
Cash and cash equivalents, end of period | | $ 65,881 | | $ 45,057 |
| | | | |
Cash paid during the period for: | | | | |
Interest | | $ 6 | | $ 5 |
Income taxes | | 882 | | 3,213 |
| | | | |
Other non-cash item: | | | | |
Purchases of property and equipment payable at end of period | | 413 | | 173 |
