Interactive Intelligence rallies as investments start to pay off

The investments Interactive Intelligence Inc. made in cloud-based services started to pay off in 2013.

The company’s profits were still slim, at $9.5 million for the year and $3.5 million in the fourth quarter, the Indianapolis software firm reported Wednesday.

But that was up from just $906,000 in profit in 2012, despite growing sales that year. The company has been going through the pains of changing its business model to focus more on the cloud, which meant pumped-up budgets for research, development, sales and marketing.

Setting up on-site call centers historically produced most of Interactive’s sales. Shifting services onto the cloud meant collecting smaller, recurring revenue over longer periods of time instead of larger, upfront lump payments.

It also meant declining earnings — the company reported nearly $15 million in profit in 2010 and 2011 as it came out of the recession. It hit an earnings peak of 17.5 million in 2007.

Interactive ended 2013 with $318.2 million in revenue, up 34 percent from $237.4 million in 2012.

Recurring revenue accounted for 46 percent of sales, and that's expected to top 50 percent in 2014, CEO Don Brown told investors during a conference call after markets closed Wednesday. Cloud-based orders are expected to reach up to 60 percent of orders in 2014.

Total revenue should be between $365 million and $370 million for the year, he said.

Stock prices for the company rocketed in 2013, even compared to a surge in the entire stock market.

Interactive shares almost doubled from $34.36 to $67.36 over the year. The stock jumped more than 10 percent in after-hours trading Wednesday, to $76 per share, after falling 2.4 percent during regular trading earlier in the day.