Interactive Intelligence shares soar after forecast upgrade

May 7, 2013

Shares of Interactive Intelligence Group Inc. surged almost 20 percent Tuesday after the company beat analysts’ quarterly estimates and boosted its annual forecast.

The Indianapolis software maker's stock shot to $49.55 per share by 11 a.m. Tuesday after closing Monday at $42. Shares finished the trading day at $49.99, a 19-percent jump.

The firm reported solid first-quarter earnings Monday afternoon, which lifted shares in after-hours trading. And it goosed its 2013 revenue forecast by $5 million, to a range between $295 million and $300 million, which would be a 24-percent to 26-percent increase from $237.4 million in revenue for 2012.

Earnings for the first quarter jumped to $1.46 million as sales orders rose 31 percent. Earnings were 7 cents per share in the first quarter compared with 1 cent per share, or $189,000, in the same period a year ago.

Revenue for the first quarter reached $73.2 million, compared to $52.8 million a year ago. Analysts predicted $64 million in revenue, according to a Thomson Reuters poll.

Larger individual sales orders helped raise earnings, CEO Don Brown said Monday. The company had twice as many orders priced at more than $250,000 than it had in the first quarter a year ago. There were 37 contracts over $250,000 in the latest period, including eight orders over $1 million

Interactive Intelligence, founded in 1994, initially focused on setting up call centers for small to midsize companies. These days, it specializes in so-called "contact centers" and pulls more business from larger customers. The firm also has tapped cloud computing as a major new market.

It has begun to realize higher profits after shifting its business model toward setting up slower-paying, cloud network-based contact centers. Previously, setting up centers with IT equipment on site generated more upfront payments. Contracts for cloud networks—where data is processed and stored offsite—are mainly paid for through subscriptions lasting several years.

The company generated 5 percent of its business from cloud contracts in 2009. By 2012, those sales grew to 35 percent, and Interactive Intelligence has forecast 50 percent by the end of 2013.

“The shift to the cloud is one of the most powerful drivers that we’ve seen in the history of our company,” Brown said Monday.

The shift is as strong as the one that began in the mid-2000s when people went from using traditional phone lines to using Internet networks to deliver phone calls, voicemails and text messages, Brown said.

Interactive Intelligence is trying to get ahead in cloud-based IT services as it races competitors as large as tech behemoth Cisco Systems Inc.

“We plan to build on our leadership position by staying ahead of the curve from a technology perspective,” Brown said.

Interactive Intelligence has attributed its recent modest profits—less than $1 million for all of 2012 after nearly $15 million in 2011—to a growth strategy relying on hefty investments in its sales team and research and development.

In the first quarter of this year, the company spent $35.8 million on sales and R&D, which was 27 percent more than a year ago.

Many investors have remained on board. The stock's share price has ballooned nearly 83 percent in the last year.


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