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--()--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 CaaS 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.

       
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
Other non-cash item:
Purchases of property and equipment payable at end of period 450 746
 

ININ-G

Contacts

ICR, Inc.
Seth Potter
Investor Relations
+1-646-277-1230
seth.potter@icrinc.com
or
Interactive Intelligence
Christine Holley
Senior Director, Market Communications
+1-317-715-8220
christine.holley@inin.com

Release Summary

Interactive Intelligence, a global leader of cloud services for customer engagement, communications and collaboration, has announced financial results for its first quarter ended March 31, 2016.

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Contacts

ICR, Inc.
Seth Potter
Investor Relations
+1-646-277-1230
seth.potter@icrinc.com
or
Interactive Intelligence
Christine Holley
Senior Director, Market Communications
+1-317-715-8220
christine.holley@inin.com