Interactive Intelligence Group, Inc. (ININ)

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Interactive Intelligence Group (ININ)

Q1 2013 Earnings Call

May 06, 2013 4:30 pm ET


Stephen R. Head - Chief Financial Officer, Principal Accounting Officer, Treasurer, Senior Vice President of Finance & Administration and Secretary

Donald E. Brown - Co-Founder, Chairman, Chief Executive Officer and President


Jeffrey Van Rhee - Craig-Hallum Capital Group LLC, Research Division

Craig Nankervis - First Analysis Securities Corporation, Research Division

Michael Latimore - Northland Capital Markets, Research Division

Tavis C. McCourt - Raymond James & Associates, Inc., Research Division



Good day, ladies and gentlemen, and thank you for standing by, and welcome to the Interactive Intelligence First Quarter 2013 Earnings Conference Call. [Operator Instructions] At this time, I'd like to turn the conference call over to Steve Head, Chief Financial Officer of Interactive Intelligence. Please go ahead.

Stephen R. Head

Thank you. Good afternoon, and thank you for joining us today to review Interactive Intelligence's first quarter 2013 financial results. With me on the call today is Don Brown, our Chairman of the Board, President and CEO.

Don will begin with a high-level review of our first quarter performance, in addition to providing an update on our key initiatives. I will then review our first quarter financial results in more detail, finishing with commentary regarding the financial outlook for Interactive Intelligence. We will then open the call for questions.

Please note that over the course of this conference call, we will make predictive statements about our results, performance, plans and objectives in an effort to assist you in understanding our company. The enterprise software industry, combined with the rapidly evolving uncertainties and the economic environment, makes predictions challenging and problematic. These predictive statements are forward-looking statements under federal securities laws.

Our actual results could differ materially from the information presented during this call, and you should review the section on forward-looking statements contained in today's earnings release, as well as our 2012 Form 10-K and other public filings with the SEC, which describe factors, risks and uncertainties that could cause our actual results to differ materially. The company disclaims any obligation or undertaking to update or revise any forward-looking statement.

Also, during this call, we will refer to non-GAAP financial measures. These non-GAAP results eliminate the impact of noncash stock-based compensation expense, purchase accounting-related adjustments and include pro forma tax expense. Management uses these non-GAAP financial measures in analyzing the business.

With that, I'll turn the call over to Don.

Donald E. Brown

Thanks, Steve, and thanks to everybody for joining us on the call today to review our first quarter 2013 results. The momentum in our business continued during the first quarter as our pipeline across all geographies remained robust and included the ongoing demand for our cloud-based solutions. The investments we've made in sales and marketing and R&D continue to pay off as we extend our product leadership position and gain momentum in the cloud market, which remains the fastest-growing segment of the contact center market. We continue to execute well on our strategy to improve our long-term financial profile, which will be driven by the increasing recurring revenue.

In the first quarter of 2013, recurring revenue, which includes both maintenance contracts and cloud-based revenues, represented 46% of total revenues. We plan to continue to invest in cloud solutions and sales to extend our leadership position in the market in order to capitalize on the growing pipeline of opportunities.

Taking a look at some of the summary-level statistics and financials for the quarter. Total orders increased 31% year-over-year, with cloud-based orders increasing 42% and representing approximately 31% of total orders. We won 74 new customers during the quarter compared to 60 in the year-ago quarter. We also had 8 orders that were over $1 million compared to 6 in the year-ago quarter, and we had an additional 31 orders that were in between $0.25 million and $1 million compared to 11 in the first quarter last year. The average dollar amount of new cloud-based customer orders was $788,000 in the first quarter, and the average dollar amount of new premises-based customer orders was $238,000.

Our first quarter non-GAAP revenues were $73.3 million, up 39% compared to last year, and non-GAAP operating income for the first quarter was $6.2 million or 8.5% of revenue, leading to non-GAAP EPS of $0.17, all of which were above expectations.

The growth in our cloud-related business continues to result in revenues being deferred to future quarters, which contributed to the overall growth of our yet-to-be-recognized future cloud revenue. During the first quarter, our overall deferred revenue and unbilled contracts increased 75% on a year-over-year basis to $206 million.

We experienced strong customer demand across the Americas, EMEA and Asia-Pacific during the first quarter. We saw particular strength in EMEA and Latin America compared to the first quarter of last year. The long-term trends and the pace of pipeline activity has continued to increase across all geographies.

We continue to benefit from the growth of cloud-based contact center adoption and our focus on execution in this market segment. I'm pleased to announce that today, we have signed the largest cloud contract in our history. The deal is with a large retailer, an existing customer that is transitioning from our on-premises product to our cloud-based offering. The key driver in this deal was our demonstrated ability to deliver high level of reliability for their contact center requirements. We aren't disclosing the dollar amount, but the contract value is significantly larger than any previous contract and will be recognized over the next 5 years. While the amounts that will be added to revenue for this year are expected to be relatively modest, this win validates both the cloud as a deployment model and the scale with which we can deliver.

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