Contact Center Solutions Featured Article

Interactive Intelligence Q1 2015 Financial Results; Cloudier Skies is a Good Thing

May 05, 2015

As has been the case for the last several quarters, customer interaction solutions provider Indianapolis-based Interactive Intelligence Group continues to see the cloud as the silver lining for its continued growth. It is a belief amplified in the financial results it reported for Q1 2015. 

The company reported a small loss for the quarter. However, this is reflective of the continuing challenges virtually all software companies are experiencing as they transition their businesses to the cloud where subscription-based business models mean revenue recognition for reporting purposes are different from the days when customers purchased long-term licenses.

In fact, as has been the case since Interactive Intelligence a few years ago decided that the future and its opportunities for growth were going to be cloud-centric, a good way to look at how they are doing is in looking at changes in revenues and orders.

A tale of market shifts and cloud interest

As noted, this is about revenues and orders and here Interactive Intelligence in many ways is an interesting way to glean insights into how the unified communications (UC), collaboration and contact center solutions business, particularly the contact center arena, is moving to the cloud.

Interactive Intelligence’s Q1 2015 revenues and orders were as follows:

Revenues: Total revenues were $89.5 million, an increase of 13 percent from the 2014 first quarter.

  • Recurring revenues, which include cloud subscriptions and support fees from on-premises licenses, increased 25 percent to $54.2 million and accounted for 61 percent of total revenues, up from 55 percent last year.
  • Revenues from cloud subscriptions were $21.0 million, an increase of 61 percent from $13.1 million in the first quarter of 2014.
  • Licenses and hardware revenues were $21.6 million and services revenues $13.6 million, compared to $22.8 million and $13.2 million, respectively, in the same quarter last year.

?Orders: During the first quarter of 2015, Interactive Intelligence added 61 new customers, including 26 new cloud customers, compared to 54 new customers during the first quarter of last year.

  • Contracts signed over $250,000 increased to 40 in the first quarter of 2015 from 34 in the first quarter of last year.
  • Contracted annual recurring revenue for cloud contracts was down year-over-year because of two very large orders received in the 2014 first quarter. Excluding these two contracts, growth in contracted annual recurring revenue was 44 percent year-over-year.
  • Interestingly, orders for on-premises licenses increased by 20 percent from the same quarter last year.

Commenting on the results, Interactive Intelligence founder and CEO Dr. Donald E. Brown stated: "We hit our marks in the first quarter and expect to continue doing so for the year...In addition to steady growth in revenues from our cloud solutions, we saw improved efficiencies in our cloud delivery operations, increased sales to new customers, growth in the number of large transactions, healthy expansion sales, and an up-tick in orders for our on-premises technology.

"The launch in March of our new PureCloud Collaborate offering was enthusiastically received. We are proceeding with additional rollouts that extend this new PureCloud multitenant platform as capabilities for unified communications and customer engagement are set for release in the next ninety days. Based on the large and growing pipeline of opportunities globally, we are reaffirming our guidance for contracted annual recurring revenue growth of 40 percent for 2015.”

"Our strategy is to meet the developing demand for integrated business collaboration, communications and customer engagement solutions. We've been successfully gaining share in the contact center market for years. Now we're moving aggressively to also pursue adjacent opportunities that we believe will enable us to significantly expand our total addressable market. Our approach, however, will remain the same: develop superior innovative technology and continually build the capacity of a global sales and support network," Brown concluded.

It should also be noted that the company’s overall financial status remains good. As of March 31, 2015, the company had cash and cash equivalents and investments of $64.9 million, up from $61.7 million as of December 31, 2014. Total deferred revenue increased to $111.6 million from $110.7 million at the end of last year. In addition, Interactive Intelligence generated $13.3 million from operating activities in the first quarter, compared to $5.3 million in the 2014 quarter. Capital expenditures totaled $6.3 million, primarily for office space expansion, office equipment, and data center infrastructure, and $5.6 million of PureCloud development costs were capitalized.

Along with the increases in cloud revenues and orders another reason for optimism going forward was Dr. Brown’s mention of PureCloud. The multitenant AWS-based solution is still in the rollout stage in terms of both geographic footprint and the full complement of functionality. Indeed, Interactive Intelligence has been right on target in terms of its delivering on the time table it established for PureCloud availability.  The impact it will have as a means for businesses of almost any size to move cost-effectively to the cloud is a reason the company is continuing to invest in building up and out its resources; hence realization of its positioning and success in the market really is just starting to materialize. 

I always caution in such postings about earnings from any company that I am not a financial analyst, do not play one on TV or the Internet and never write about companies I have a financial interest in. That said, watching how enterprises facing the need to transform all of their ICT capabilities to meet the demands of a connected and  real-time interactive world are increasingly looking to the cloud for solutions has been fascinating to chronicle, and the trend, especially in the UC and contact center spaces where transformation to an omnichannel, mobile-friendly and big data influenced operational environment has taken on somewhat of a sense of urgency, is a major reason to look carefully when financial data becomes available from significant players in various markets including adjacent ones.

Edited by Dominick Sorrentino