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UPDATE: Interactive falls after results miss expectations

May 6, 2014

Interactive Intelligence Group Inc. shares fell more than 19 percent Monday night and Tuesday morning after the company reported an unexpected loss in the first quarter, missing analyst predictions.

The Indianapolis-based software company on Monday afternoon reported a loss $2.6 million, or 12 cents per share, in the latest quarter. It marked the company's first quarterly loss since the third quarter of 2012. Interactive earned $1.5 million, or 7 cents per share, in the same quarter a year ago.

Company shares dropped sharply in after-market trading Monday and continued to sink Tuesday. The stock traded at $50.35 shortly after noon, down $11.75, or 18.9 percent from Monday's closing price.

The adjusted loss for the quarter was $400,000, or 2 cents per share, compared to adjusted earnings of $3.6 million or 17 cents per share, a year ago.

Analysts polled by Thomson Reuters expected adjusted earnings of 1 cent per share.

Revenue for the quarter, which ended March 31, rose more than 8 percent, to $79.4 million. Analysts expected revenue of $79.67 million.

Management blamed the loss on the company’s ongoing shift to cloud-based software.

"As we increasingly shift to a higher proportion of cloud-based orders and have more revenue deferred to future quarters, our reported short-term profitability is affected," CEO Don Brown said in a prepared statement issued Monday after markets closed. "But we look beyond this and remain committed to making investments that drive the growth of our business, particularly with our cloud-based offerings targeting the highest growth segment of our market."

Deferred and unbilled revenue increased 56 percent, to $321 million, up from $206 million a year ago.

Cloud-based orders for the Interactive’s software, which helps manage corporate contact centers, increased 165 percent, to 59 percent of total orders.

Cloud orders also increased in size, to an average of $935,000 each, up from $788,000 a year earlier.

The shift to the cloud began lowering Interactive’s profit in 2012.

The change meant a shift in the company’s fundamental sales model. Previously, the company set up call centers on-site for customers and collected fees. Using the cloud means collecting subscriptions from customers, which causes revenue to come in much more gradually.

The company needs to hire and expand operations in order to keep up with demand, Brown and Chief Financial Officer Stephen Head said during a conference call with investors and analysts.

Monday’s earnings release came four days after Interactive made a major hiring announcement for Indianapolis.


 

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