Interactive Intelligence Reports 2016 First Quarter Financial Results
•Signed 118 PureCloud® customers in Q1, almost five times greater than Q4 2015
•Cloud subscription revenues up 41% year-over-year
•Total revenues of $99.3 million
•Generated operating cash flow of $11.2 million
INDIANAPOLIS, May 2, 2016 -- Interactive Intelligence Group Inc. (Nasdaq: ININ), a global leader of cloud services for customer engagement, communications and collaboration, has announced financial results for its first quarter ended March 31, 2016.
“PureCloud® sales exceeded our expectations this quarter,” said Dr. Donald Brown, Interactive Intelligence founder and CEO. “We went from 24 PureCloud® customers at the end of last year, to 142 by the close of the first quarter, and we’re still in the very early stages of selling it worldwide. We’re excited to see both large and small customers embrace the speed to value delivered through PureCloud®, which offers a compelling feature-set delivered through a flexible, monthly licensing model enabling rapid configuration and deployment.”
Brown added, “Our indirect channel rapidly adopted PureCloud®, as partners drove almost 25% of the PureCloud® deals in the quarter, and our strategy to simplify our licensing model through monthly contracts was leveraged by the vast majority of our new customers. Overall, we participated in more deals than ever in our history and added a record 163 new customers across all three of our product lines in the quarter.
“Although results from our on-premises solution came in as expected, more of these contracts came from our partner channel in this and the previous quarter,” Brown continued. “This impacted our professional services revenues and the difference went to our bottom line. The business still efficiently generated cash in the quarter, with operating cash flow of $11.2 million.”
Brown concluded, “We are focused on becoming the leader in the customer engagement market, and our strategy is based on providing industry-leading solutions for organizations anywhere, of any size, and implemented in any way, whether in the cloud or on-premises. We plan to gain market share by addressing the fastest growing segment of the market with PureCloud®, while giving no ground to competitors in traditional segments with our robust CIC and CaaSSM offerings.”
First Quarter 2016 Financial Highlights:
| • | Revenues: Total revenues were $99.3 million, an increase of 11% from $89.5 million in the first quarter of 2015. Recurring revenues, which include cloud subscriptions and support fees from on-premises licenses, increased 19% to $64.3 million and accounted for 65% of total revenues. Revenues from cloud subscriptions grew 41% to $29.7 million, compared to $21.0 million in the same quarter last year. License and hardware revenues were $21.4 million and services revenues were $13.6 million, compared to $21.6 million and $13.6 million, respectively, in the 2015 first quarter. |
| • | Operating Loss: GAAP operating loss was $10.8 million, compared to a loss of $4.8 million in the first quarter of 2015. Non-GAAP* operating loss was $6.2 million, compared to a loss of $1.1 million in the same quarter last year. |
| • | Net Loss: GAAP net loss was $13.3 million, or $0.60 per diluted share based on 22.0 million weighted average diluted shares outstanding, compared to GAAP net loss of $3.5 million, or $0.16 per diluted share based on 21.4 million weighted average diluted shares outstanding in the same quarter of 2015. Non-GAAP net loss was $4.0 million, or $0.18 per diluted share, compared to a loss of $863,000, or $0.04 per diluted share in the same quarter last year. |
| • | Balance Sheet: Cash and cash equivalents and investments were $198.0 million, compared to $189.5 million as of December 31, 2015. Total deferred revenues were $135.1 million, consistent with $135.4 million at the end of last year. |
| • | Cash Flows: The company generated $11.2 million of cash from operating activities during the quarter, compared to $15.9 million in the 2015 first quarter. Capital expenditures totaled $2.0 million, primarily for data center infrastructure expansions. |
| * | 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.” |
The company will host a conference call today at 4:30 p.m. Eastern time (EDT) featuring Dr. Brown and the company's CFO, Ashley Vukovits. A live Q&A session will follow opening remarks.
To access the teleconference, 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 first 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 leader of cloud services for customer engagement, communications and collaboration designed to help businesses worldwide improve service, increase productivity and reduce costs. Backed by a 20-plus year history of industry firsts, 150-plus pending patent applications, and more than 6,000 global customer deployments, Interactive offers customers fast return on investment, along with robust reliability, scalability and security. It's also the only company recognized by the top global industry analyst firm as a leader in both the cloud and on-premises customer engagement markets. The company is headquartered in Indianapolis, Indiana and has more than 2,000 employees worldwide. For more information, visit 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, certain acquisition-related expenses, the amortization of certain intangible assets related to acquisitions by the company and the amortization of debt discounts and issuance costs 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, amortization of intangibles related to acquisitions, and amortization of debt discounts and issuance costs 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, certain acquisition-related expenses, amortization of intangibles related to acquisitions and amortization of debt discounts and issuance costs 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, certain acquisition-related expenses, amortization of intangibles amounts related to acquisitions, amortization of debt discounts and issuance costs, and pro forma income tax expense 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 and competitive pressures in the industry; worldwide economic conditions and their impact on customer purchasing decisions; the company's profitability; the company’s ability to: manage successfully its growth; meet debt service requirements; manage successfully its increasingly complex third-party relationships resulting from the software and hardware components being licensed or sold with its product offerings; maintain successful relationships with certain suppliers which may be impacted by the competition in the technology industry; maintain successful relationships with its current and any new partners; maintain and improve its current products; develop new products; protect its proprietary rights and sensitive customer information adequately; improve the company’s brand and name recognition; 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, and holds certain registrations for, the marks INTERACTIVE INTELLIGENCE, its associated LOGO, PURECLOUD and numerous other trademarks and service marks in the United States and various other jurisdictions around the world. All third-party trademarks mentioned in this document are the property of their respective owners.
ININ-G
Contacts:
Seth Potter
Investor Relations
ICR, Inc.
+1 646.277.1230
seth.potter@icrinc.com
Christine Holley
Senior Director, Market Communications
Interactive Intelligence
+1 317.715.8220
christine.holley@inin.com
###
| Interactive Intelligence Group, Inc. | ||||||||
| Condensed Consolidated Statements of Operations | ||||||||
| (in thousands, except per share amounts) | ||||||||
| (unaudited) | ||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2016 | 2015 | |||||||
| Revenues: | ||||||||
| Recurring | $ | 64,290 | $ | 54,212 | ||||
| License and hardware | 21,378 | 21,621 | ||||||
| Services | 13,613 | 13,642 | ||||||
| Total revenues | 99,281 | 89,475 | ||||||
| Costs of revenues (1)(2): | ||||||||
| Costs of recurring | 22,436 | 18,744 | ||||||
| Costs of license and hardware | 6,391 | 6,529 | ||||||
| Costs of services | 11,551 | 11,251 | ||||||
| Total costs of revenues | 40,378 | 36,524 | ||||||
| Gross profit | 58,903 | 52,951 | ||||||
| Operating expenses (1)(2): | ||||||||
| Sales and marketing | 34,436 | 31,109 | ||||||
| Research and development | 22,780 | 13,837 | ||||||
| General and administrative | 12,510 | 12,776 | ||||||
| Total operating expenses | 69,726 | 57,722 | ||||||
| Operating loss | (10,823 | ) | (4,771 | ) | ||||
| Other expense: | ||||||||
| Interest (expense) income, net | (1,837 | ) | 148 | |||||
| Other expense | (251 | ) | (327 | ) | ||||
| Total other expense | (2,088 | ) | (179 | ) | ||||
| Loss before income taxes | (12,911 | ) | (4,950 | ) | ||||
| Income tax (expense) benefit | (341 | ) | 1,491 | |||||
| Net loss | $ | (13,252 | ) | $ | (3,459 | ) | ||
| Net loss per share: | ||||||||
| Basic | $ | (0.60 | ) | $ | (0.16 | ) | ||
| Diluted | (0.60 | ) | (0.16 | ) | ||||
| Shares used to compute net loss per share: | ||||||||
| Basic | 22,007 | 21,447 | ||||||
| Diluted | 22,007 | 21,447 | ||||||
| (1) Amounts include amortization of purchased intangibles from business combinations, as follows: | ||||||||
| Costs of license and hardware revenues | $ | 186 | $ | 177 | ||||
| General and administrative | 417 | 449 | ||||||
| Total intangible amortization expense | $ | 603 | $ | 626 | ||||
| (2) Amounts include stock-based compensation expense, as follows: | ||||||||
| Costs of recurring revenues | $ | 393 | $ | 432 | ||||
| Costs of license and hardware revenues | 30 | 22 | ||||||
| Costs of services revenues | 274 | 129 | ||||||
| Sales and marketing | 817 | 561 | ||||||
| Research and development | 1,754 | 819 | ||||||
| General and administrative | 701 | 1,030 | ||||||
| Total stock-based compensation expense | $ | 3,969 | $ | 2,993 | ||||
| Interactive Intelligence Group, Inc. | ||||||||
| Reconciliation of Supplemental Financial Information | ||||||||
| (in thousands, except per share amounts) | ||||||||
| (unaudited) | ||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2016 | 2015 | |||||||
| GAAP recurring revenue gross profit, as reported | $ | 41,854 | $ | 35,468 | ||||
| Purchase accounting adjustments | 2 | 3 | ||||||
| Non-cash stock-based compensation expense | 393 | 432 | ||||||
| Non-GAAP recurring revenue gross profit | $ | 42,249 | $ | 35,903 | ||||
| Non-GAAP recurring revenue gross margin | 65.7 | % | 66.2 | % | ||||
| GAAP license and hardware revenue gross profit, as reported | $ | 14,987 | $ | 15,092 | ||||
| Acquired technology | 186 | 177 | ||||||
| Non-cash stock-based compensation expense | 30 | 22 | ||||||
| Non-GAAP license and hardware revenue gross profit | $ | 15,203 | $ | 15,291 | ||||
| Non-GAAP license and hardware revenue gross margin | 71.1 | % | 70.7 | % | ||||
| GAAP services revenue gross profit, as reported | $ | 2,062 | $ | 2,391 | ||||
| Non-cash stock-based compensation expense | 274 | 129 | ||||||
| Non-GAAP services revenue gross profit | $ | 2,336 | $ | 2,520 | ||||
| Non-GAAP services revenue gross margin | 17.2 | % | 18.5 | % | ||||
| GAAP gross profit, as reported | $ | 58,903 | $ | 52,951 | ||||
| Purchase accounting adjustments | 2 | 3 | ||||||
| Acquired technology | 186 | 177 | ||||||
| Non-cash stock-based compensation expense | 697 | 583 | ||||||
| Non-GAAP gross profit | $ | 59,788 | $ | 53,714 | ||||
| Non-GAAP gross margin | 60.2 | % | 60.0 | % | ||||
| GAAP operating loss, as reported | $ | (10,823 | ) | $ | (4,771 | ) | ||
| Purchase accounting adjustments | 605 | 629 | ||||||
| Non-cash stock-based compensation expense | 3,969 | 2,993 | ||||||
| Non-GAAP operating loss | $ | (6,249 | ) | $ | (1,149 | ) | ||
| Non-GAAP operating margin | (6.3 | )% | (1.3 | )% | ||||
| GAAP net loss, as reported | $ | (13,252 | ) | $ | (3,459 | ) | ||
| Purchase accounting adjustments | 605 | 629 | ||||||
| Non-cash stock-based compensation expense | 3,969 | 2,993 | ||||||
| Amortization of debt discount and issuance costs | 1,597 | — | ||||||
| Non-GAAP income tax expense adjustment | 3,037 | (1,026 | ) | |||||
| Non-GAAP net loss | $ | (4,044 | ) | $ | (863 | ) | ||
| GAAP diluted loss per share, as reported | $ | (0.60 | ) | $ | (0.16 | ) | ||
| Purchase accounting adjustments | 0.03 | 0.03 | ||||||
| Non-cash stock-based compensation expense | 0.18 | 0.14 | ||||||
| Amortization of debt discount and issuance costs | 0.07 | — | ||||||
| Non-GAAP income tax expense adjustment | 0.14 | (0.05 | ) | |||||
| Non-GAAP diluted loss per share | $ | (0.18 | ) | $ | (0.04 | ) | ||
| Interactive Intelligence Group, Inc. | ||||||||
| Reconciliation of Net Loss to Adjusted EBITDA | ||||||||
| (in thousands) | ||||||||
| (unaudited) | ||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2016 | 2015 | |||||||
| Reconciliation of Net Loss to Adjusted EBITDA | ||||||||
| Net loss | $ | (13,252 | ) | $ | (3,459 | ) | ||
| Depreciation | 4,447 | 4,736 | ||||||
| Amortization | 2,992 | 626 | ||||||
| Interest expense (income), net | 1,837 | (148 | ) | |||||
| Income tax expense (benefit) | 341 | (1,491 | ) | |||||
| Stock-based compensation expense | 3,969 | 2,993 | ||||||
| Acquisition-related expenses | — | 1 | ||||||
| Other expense | 251 | 327 | ||||||
| Adjusted EBITDA | $ | 585 | $ | 3,585 | ||||
| Interactive Intelligence Group, Inc. | ||||||||
| Comprehensive Loss | ||||||||
| (in thousands) | ||||||||
| (unaudited) | ||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2016 | 2015 | |||||||
| Net loss | $ | (13,252 | ) | $ | (3,459 | ) | ||
| Other comprehensive loss: | ||||||||
| Foreign currency translation adjustment | 1,737 | (3,262 | ) | |||||
| Net unrealized investment gain - net of tax | 248 | 59 | ||||||
| Comprehensive loss | $ | (11,267 | ) | $ | (6,662 | ) | ||
| Interactive Intelligence Group, Inc. | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| (in thousands) | ||||||||
| March 31, | December 31, | |||||||
| 2016 | 2015 | |||||||
| Assets | (unaudited) | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 114,549 | $ | 94,808 | ||||
| Short-term investments | 58,558 | 64,182 | ||||||
| Accounts receivable, net | 87,107 | 106,950 | ||||||
| Prepaid expenses | 37,252 | 32,709 | ||||||
| Other current assets | 12,301 | 13,264 | ||||||
| Total current assets | 309,767 | 311,913 | ||||||
| Long-term investments | 24,934 | 30,503 | ||||||
| Property and equipment, net | 42,755 | 44,837 | ||||||
| Capitalized software, net | 42,733 | 43,783 | ||||||
| Goodwill | 42,573 | 41,848 | ||||||
| Intangible assets, net | 14,449 | 14,427 | ||||||
| Other assets, net | 6,283 | 6,222 | ||||||
| Total assets | $ | 483,494 | $ | 493,533 | ||||
| Liabilities and Shareholders' Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 10,209 | $ | 10,571 | ||||
| Accrued liabilities | 17,787 | 17,157 | ||||||
| Accrued compensation and related expenses | 13,576 | 18,910 | ||||||
| Deferred license and hardware revenues | 4,298 | 7,823 | ||||||
| Deferred recurring revenues | 96,276 | 92,773 | ||||||
| Deferred services revenues | 15,367 | 14,979 | ||||||
| Total current liabilities | 157,513 | 162,213 | ||||||
| Convertible notes | 119,619 | 118,022 | ||||||
| Long-term deferred revenues | 19,158 | 19,834 | ||||||
| Deferred tax liabilities, net | 2,229 | 2,143 | ||||||
| Other long-term liabilities | 7,645 | 7,291 | ||||||
| Total liabilities | 306,164 | 309,503 | ||||||
| Shareholders' equity: | ||||||||
| Common stock | 221 | 218 | ||||||
| Additional paid-in-capital | 242,060 | 237,496 | ||||||
| Accumulated other comprehensive loss | (9,259 | ) | (11,244 | ) | ||||
| Accumulated deficit | (55,692 | ) | (42,440 | ) | ||||
| Total shareholders' equity | 177,330 | 184,030 | ||||||
| Total liabilities and shareholders' equity | $ | 483,494 | $ | 493,533 | ||||
| Interactive Intelligence Group, Inc. | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (in thousands) | ||||||||
| (unaudited) | ||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2016 | 2015 | |||||||
| (unaudited) | ||||||||
| Operating activities: | ||||||||
| Net loss | $ | (13,252 | ) | $ | (3,459 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation | 4,447 | 4,736 | ||||||
| Amortization | 2,992 | 626 | ||||||
| Other non-cash items | (214 | ) | (1,352 | ) | ||||
| Stock-based compensation expense | 3,969 | 2,993 | ||||||
| Deferred income taxes | 86 | (160 | ) | |||||
| Amortization of investment premium | 64 | 124 | ||||||
| Loss on disposal of fixed assets | 279 | 5 | ||||||
| Amortization of debt issuance costs | 176 | — | ||||||
| Amortization of debt discount | 1,421 | — | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 19,843 | 12,425 | ||||||
| Prepaid expenses | (4,543 | ) | 122 | |||||
| Other current assets | 963 | (1,051 | ) | |||||
| Accounts payable | (362 | ) | 199 | |||||
| Accrued liabilities | 690 | 1,040 | ||||||
| Accrued compensation and related expenses | (5,334 | ) | (2,133 | ) | ||||
| Deferred licenses and hardware revenues | (3,539 | ) | 2,174 | |||||
| Deferred recurring revenues | 3,403 | (1,199 | ) | |||||
| Deferred services revenues | (174 | ) | (18 | ) | ||||
| Other assets and liabilities | 293 | 785 | ||||||
| Net cash provided by operating activities | 11,208 | 15,857 | ||||||
| Investing activities: | ||||||||
| Sales of available-for-sale investments | 29,741 | 14,805 | ||||||
| Purchases of available-for-sale investments | (18,364 | ) | — | |||||
| Purchases of property and equipment | (1,964 | ) | (6,260 | ) | ||||
| Capitalized software | (1,312 | ) | (5,872 | ) | ||||
| Net cash provided by investing activities | 8,101 | 2,673 | ||||||
| Financing activities: | ||||||||
| Principal payments on capital lease obligations | (60 | ) | — | |||||
| Proceeds from stock options exercised | 1,745 | 1,497 | ||||||
| Proceeds from issuance of common stock | 458 | 388 | ||||||
| Tax withholding on restricted stock awards | (1,711 | ) | (2,306 | ) | ||||
| Net cash provided by (used in) financing activities | 432 | (421 | ) | |||||
| Net increase in cash and cash equivalents | 19,741 | 18,109 | ||||||
| Cash and cash equivalents, beginning of period | 94,808 | 36,168 | ||||||
| Cash and cash equivalents, end of period | $ | 114,549 | $ | 54,277 | ||||
| Cash paid during the period for: | ||||||||
| Interest | $ | 8 | $ | — | ||||
| Income taxes | 728 | 120 | ||||||
| Non-cash financing and investing activities: | ||||||||
| Issuance of retirement plan shares | — | 2,523 | ||||||
| Other non-cash item: | ||||||||
| Purchases of property and equipment payable at end of period | 450 | 746 | ||||||