Focus on the Cloud Powers Interactive Intelligence to Strong Q4

Interactive Intelligence (News - Alert) posted better-than-expected fourth quarter results on Wednesday, powered mostly by strong orders of cloud-based solutions and an uptick in recurring revenue.

The call center solutions provider posted revenues of $57.7 million in Q4, a year-over-year increase of 14.4 percent. Recurring revenues were up 23 percent in the quarter and accounted for 42 percent of that total.

Cloud-based orders were up a whopping 500 percent year-over-year, contributing to $3.8 million in revenue. Cloud orders represented 23 percent of total orders in 2011, and are only expected to increase in the coming year.

"We show ever-increasing momentum among customer cloud deployments, which is the highest growth segment of our market," said Interactive Intelligence CEO Donald Brown (News - Alert). "In 2012, we plan to capitalize on this momentum and step up investments to further enhance our brand recognition, extend our product capabilities and gain additional market share."

Interactive Intelligence earned $4.6 million in the quarter, down from $7.1 million in the Q4 of 2010. Non-GAAP earnings per share dropped from $0.37 to $0.54 year-over-year, but beat out Wall Street consensus estimates of $0.35 per share.

GAAP operating income also dropped – from $9.1 million in Q4 of 2010 to $6.5 million last quarter – primarily due to the increase of cloud-based orders. Unlike on-premise product orders – which provide upfront revenue – cloud-based orders bring in recurring revenue over the life of a contract.

"Our order mix is expected to continue shifting toward the cloud, which combined with strategic investments in sales, marketing and development is expected to reduce our reported profitability from a near-term perspective," Brown acknowledged.

"However, we’re confident in the long-term viability of our business model, and our ability to generate shareholder value," he continued. "We’re addressing a multi-billion dollar market opportunity, and we’re taking focused action to grow the business for long-term financial success driven by increasing recurring revenue."

On the year, Interactive Intelligence posted total revenues of $209.5 million, representing a 26 percent increase over 2010 totals. Recurring revenues – strengthened by a greater focus on the cloud –increased 33 percent and accounted for 44 percent of total revenues. The company added 301 new customers on the year, 42 of whom were cloud customers. Cloud-based orders grew 179 percent year-over-year.

Net income and operating income dipped slightly from 2010 to 2011, also primarily due to the uptick in cloud-based orders. Interactive Intelligence posted a net income of $14.8 million – down from $14.9 million in 2010 – and GAAP operating income of $21.6 million, compared to $23.4 million in 2010.

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