Indianapolis-based Interactive Intelligence Group Inc. (Nasdaq: ININ) is reporting second quarter net income of $1.2 million, compared to a net loss of $1.1 million during the same period a year earlier. Chief Executive Officer Donald Brown says the performance was partially driven by the signing of the company's largest contract in history. August 5, 2013

News Release

INDIANAPOLIS, Ind. - 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 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