-

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.

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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.

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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.

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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.

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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.    

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Income Taxes: Income tax expense for the fourth quarter was $2.9 million and resulted in an annual effective rate of 27 percent.

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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.

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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.

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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.

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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.

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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. 

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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.

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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.

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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. 

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Interactive Intelligence’s cloud offering achieved the highest PCI (Payment Card Industry) Data Security Standard level of validation. 

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Interactive Intelligence’s all-in-one IP communications software suite achieved Lync 2013 qualification for interoperability with Microsoft® Lync™ Server.

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Interactive Intelligence received Miercom's Performance Verified Certification of its contact center and unified communications software.

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TMC’s Cloud Computing Magazine honored Interactive Intelligence with its 2013 Cloud Computing Excellence Award.

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

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

Other income (expense):

Interest income, net

Other expense

Total other income (expense)

Income before income taxes

Income tax expense

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

Comprehensive income

$          3,019

$          2,208

$       8,514

$         424

Net income per share:

Basic

Diluted

$            0.17

$            0.12

$         0.47

$        0.05

Shares used to compute net income per share:

Basic

Diluted

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

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

Non-cash stock-based compensation expense

Non-GAAP recurring revenue gross profit

$      27,918

$      24,380

$    103,084

$        87,161

Non-GAAP recurring revenue gross margin

Services revenue gross profit as reported

$        2,975

$        3,964

$      13,825

$          9,297

Non-cash stock-based compensation expense

Non-GAAP services revenue gross profit

$        3,035

$        3,991

$      14,070

$          9,444

Non-GAAP services revenue gross margin

Total revenue, as reported

$      90,785

$      70,542

$    318,234

$      237,365

Purchase accounting adjustments

Non-GAAP total revenue

$      90,795

$      70,720

$    318,436

$      237,887

Gross Profit

$      57,969

$      48,438

$    204,180

$      159,547

Revenue adjustments

Acquired technology

Non-cash stock-based compensation expense

Non-GAAP gross profit

$      58,306

$      48,836

$    205,629

$      160,902

Non-GAAP gross margin

Operating income, as reported

$        6,458

$        3,529

$      14,397

$          1,083

Purchase accounting adjustments

Non-cash stock-based compensation expense

Non-GAAP operating income

$        9,275

$        5,948

$      25,952

$        10,247

Non-GAAP operating margin

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

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

$        5,582

$        5,728

$      16,682

$        10,070

Diluted EPS, as reported

$          0.17

$          0.11

$          0.45

$            0.04

Purchase accounting adjustments

Non-cash stock-based compensation expense

Non-GAAP income tax expense adjustment

 -

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

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

$         353,225

$         281,796

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable

$             8,727

$             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

Shareholders' equity:

Preferred stock

 -

 -

Common stock

Additional paid-in-capital

Accumulated other comprehensive loss

Retained earnings

Total shareholders' equity

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

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

Accounts payable

Accrued liabilities

Accrued compensation and related expenses

Deferred product revenues

Deferred services revenues

Other assets and liabilities

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

Capitalized internal use software cost

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

Tax withholding on restricted stock awards

Tax benefits from stock-based payment arrangements

Net cash provided by financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

$       65,881

$     45,057

Cash paid during the period for:

Interest

$                6

$              5

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

Q3

Q4

Total

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

$        272

$        503

$        485

$         394

Cloud-based