ININ

Interactive Intelligence Group, Inc. (ININ)

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Interactive Intelligence Group (ININ)

Q4 2013 Earnings Call

January 29, 2014 4:30 pm ET

Executives

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

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

Analysts

Shyam Patil - Wedbush Securities Inc., Research Division

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

Raghavan Sarathy - Dougherty & Company LLC, Research Division

Craig Nankervis - First Analysis Securities Corporation, Research Division

Michael Latimore - Northland Capital Markets, Research Division

Presentation

Operator

Good day, ladies and gentlemen, thank you for standing by and welcome to the Interactive Intelligence Fourth Quarter Earnings Conference Call. [Operator Instructions] As a reminder, today's conference may be recorded. It's now my pleasure to turn the floor over to your Chief Financial Officer, Steve Head. Sir, the floor is yours.

Stephen R. Head

Thank you and good afternoon, everyone, and thank you for joining us today to review Interactive Intelligence's fourth quarter and full year 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 fourth quarter and full year performance in addition to providing an update on our key initiatives. I will then review our fourth quarter and full year financial results in more detail. And Don will finish with a commentary regarding our financial outlook. 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, make 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 fourth quarter and full year 2013 results.

The fourth quarter capped off a phenomenal year for us. As you may recall, we started out the year hoping to grow orders about 20% and instead achieved an order growth rate of 30%. In particular, our cloud orders grew 87% over the previous year and revenues increased 34% over 2012. We feel that we accomplished our goal of establishing Interactive Intelligence as the premier vendor of high-end contact center solutions for both on-premises and cloud-based deployments.

We begin 2014 with great momentum and anticipate another year of strong order and revenue growth, of which an increasing percentage will be recurring in nature. During 2014, we expect recurring revenue, which includes both maintenance contracts and cloud-based revenues to represent about 50% of total revenues, up from 46% last year and for our cloud-based business to account for 55% to 60% of orders as compared to 50% last year and 35% in 2012.

Given the ongoing global momentum in the cloud market, we plan to continue to invest in cloud solutions and sales to extend our leadership position in order to capitalize on the growing pipeline of opportunities we're seeing around the world. As a result, we expect 2014 total order growth to be 20% or more, which is above our previous guidance and is on top of what we did in 2013, which was also more than we expected.

Taking a look at some of the summary level statistics and the financials for the fourth quarter, we won 86 new customers during the quarter compared to 67 in Q3 and 110 in the year-ago quarter. We had 15 orders that were over $1 million. This compares to 12 in the third quarter and 19 in the year-ago quarter and we had an additional 48 orders that were between $250,000 and $1 million compared to 35 in Q3 and 49 in the year-ago quarter.

The average dollar amount of new cloud-based customer orders continues to increase sequentially, rising to $836,000 in the fourth quarter compared to $796,000 in the third quarter. As expected, total orders declined year-over-year by 15%, primarily due to the comparison to last year's unbelievable fourth quarter when we received our premises-based order of over $15 million and a cloud-based order of over $5 million.

Our fourth quarter revenues were $90.8 million, up 28% compared to last year and non-GAAP operating income for the fourth quarter was $9.3 million or 10.2% of revenue leading to non-GAAP EPS of $0.26, all of which were well above expectations.

The fourth quarter contributed to another strong year for Interactive Intelligence. As I mentioned earlier, total orders for the full year 2013 increased 30%, well above our guidance. We added 316 new customers compared with 302 new customers in 2012. We closed 48 contracts of more than $1 million, up from 42 in 2012, and we closed an additional 144 contracts between $250,000 and $1 million, up approximately 24% compared to 116 in 2012.

Read the rest of this transcript for free on seekingalpha.com