-

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

-

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.

-

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.

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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.

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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.

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Interactive Intelligence was once again positioned in the “Leaders” quadrant in Gartner’s 2013 Magic Quadrant for Contact Center Infrastructure report.

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

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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.

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

Interactive Intelligence Group, Inc.

Condensed Consolidated Statements of Income and Comprehensive Income

(in thousands, except per share amounts)

(unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2013

2012

2013

2012

Revenues:

Product

$        27,909

$        19,662

$    55,900

$    39,097

Recurring

Services

Total revenues

Costs of revenues:

Costs of product

Costs of recurring

Costs of services

Amortization of intangible assets

Total costs of revenues

Gross profit

Operating expenses:

Sales and marketing

Research and development

General and administrative

Amortization of intangible assets

Total operating expenses

Operating income (loss)

Other income (expense):

Interest income, net

Other income (expense)

Total other income (expense)

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

$          1,164

$         (1,108)

$      2,621

$       (919)

Other comprehensive income (loss):

Foreign currency translation adjustment

$               17

$         (1,164)

$         122

$       (783)

Net unrealized investment (loss) gain - net of tax

Comprehensive income (loss)

$          1,015

$         (2,322)

$      2,545

$    (1,520)

Net income (loss) per share:

Basic

$            0.06

$        0.13

Diluted

Shares used to compute net income (loss) per share:

Basic

Diluted

Interactive Intelligence Group, Inc.

Reconciliation of Supplemental Financial Information

(in thousands, except per share amounts)

Unaudited

Three Months Ended

Six Months Ended

June 30,

June 30,

2013

2012

2013

2012

Recurring revenue, as reported

$      35,106

$      28,398

$      68,933

$       56,037

Purchase accounting adjustments

Non-GAAP recurring revenue

$      35,169

$      28,468

$      69,081

$       56,237

Recurring revenue gross profit as reported

$      24,873

$      20,560

$      48,558

$       40,958

Purchase accounting adjustments

Non-cash stock-based compensation expense

Non-GAAP recurring revenue gross profit

$      25,144

$      20,760

$      49,081

$       41,411

Non-GAAP recurring revenue gross margin

.

Services revenue, as reported

$      13,227

$        6,721

$      24,647

$       12,415

Purchase accounting adjustments

 -

 -

 -

 -

Non-GAAP services revenue

$      13,227

$        6,721

$      24,647

$       12,415

Services revenue gross profit as reported

$        3,381

$        1,896

$        6,940

$         3,356

Purchase accounting adjustments

 -

 -

 -

 -

Non-cash stock-based compensation expense

Non-GAAP services revenue gross profit

$        3,448

$        1,938

$        7,056

$         3,432

Non-GAAP services revenue gross margin

Total revenue, as reported

$      76,242

$      54,781

$    149,480

$     107,549

Purchase accounting adjustments

Non-GAAP total revenue

$      76,305

$      54,851

$    149,628

$     107,749

Gross Profit

$      48,900

$      36,083

$      96,208

$       71,690

Revenue adjustments

Technology

Non-cash stock-based compensation expense

Non-GAAP gross profit

$      49,287

$      36,360

$      96,945

$       72,289

Non-GAAP gross margin

Operating income (loss) , as reported

$           849

$       (1,807)

$        4,264

$        (1,531)

Purchase accounting adjustments

Non-cash stock-based compensation expense

Non-GAAP operating income

$        3,817

$           391

$      10,017

$         2,834

Non-GAAP operating margin

Three Months Ended

Six Months Ended

June 30,

June 30,

2013

2012

2013

2012

Net income (loss), as reported

$        1,164

$       (1,108)

$        2,621

$           (919)

Purchase accounting adjustments:

Increase to revenues

Reduction of operating expenses:

Customer Relationships

Technology

Non-compete agreements

Acquisition Costs

Total

Non-cash stock-based compensation expense:

Cost of recurring revenues

Cost of services revenues

Sales and marketing

Research and development

General and administrative

Total

Non-GAAP income tax expense adjustment

Non-GAAP net income

$        2,921

$           580

$        6,523

$         2,434

Diluted EPS, as reported

$          0.06

$         (0.06)

$          0.13

$          (0.05)

Purchase accounting adjustments

Non-cash stock-based compensation expense

Non-GAAP income tax expense adjustment

$         (0.09)

Non-GAAP diluted EPS

$          0.14

$          0.03

$          0.31

$           0.13

Interactive Intelligence Group, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

June

December

2013

2012

Assets

(unaudited)

Current assets:

Cash and cash equivalents

$           43,051

$           45,057

Short-term investments

Accounts receivable, net

Deferred tax assets, net

Prepaid expenses

Other current assets

Total current assets

Long-term investments

Property and equipment, net

Goodwill

Intangible assets, net

Other assets, net

Total assets

$         306,058

$         281,796

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable

$             7,953

$             8,796

Accrued liabilities

Accrued compensation and related expenses

Deferred product revenues

Deferred services revenues

Total current liabilities

Long-term deferred revenues

Deferred tax liabilities, net

Other long-term liabilities

Total liabilities

$         147,262

$         137,679

Shareholders' equity:

Preferred stock

 -

 -

Common stock

Additional paid-in-capital

Accumulated other comprehensive loss

Retained earnings

Total shareholders' equity

Total liabilities and shareholders' equity

$         306,058

$         281,796

Interactive Intelligence Group, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

Six Months Ended

June 30,

2013

2012

(unaudited)

Operating activities:

Net income (loss)

$         2,621

$         (919)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation

Amortization

Other non-cash items

Stock-based compensation expense

Tax benefits from stock-based payment arrangements

Deferred income tax

Amortization (accretion) of investment premium (discount)

Loss on disposal of fixed assets

 -

Changes in operating assets and liabilities:

Accounts receivable

Prepaid expenses

Other current assets

Other assets

Accounts payable

Accrued liabilities

Accrued compensation and related expenses

Deferred product revenues

Deferred services revenues

Net cash provided by operating activities

Investing activities:

Sales of available-for-sale investments

Purchases of available-for-sale investments

Purchases of property and equipment

Acquisitions, net of cash

Unrealized gain on investment

Net cash used in investing activities

Financing activities:

Proceeds from stock options exercised

Proceeds from issuance of common stock

Employee taxes withheld for restricted stock units

Tax benefits from stock-based payment arrangements

Net cash provided by financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

$       43,051

$     23,940

Cash paid during the period for:

Interest

$               -

Income taxes

Other non-cash item:

Purchases of property and equipment payable at end of period

Supplemental Data

(Dollars in thousands)

(unaudited)

2012

2013

Q1

Q2

Q3

Q4

Total

Q1

Q2

Margins (GAAP):

Product

Recurring

Services

Overall

Year-over-year Revenue Growth (GAAP):

Product

-4.8%

-18.8%

-4.5%

Recurring

Services

-8.4%

Overall

Orders:

Over $1 million

Between $250,000 and $1 million

Number of new customers

Average new customer order:

Overall

$              240

$              349

$              409

$              623

$              440

$              335

$              279

Cloud-based