Interactive Intelligence reports 2008 third quarter and nine-month results

Interactive Intelligence (Nasdaq: ININ), a global developer of unified IP business communications solutions, announces third quarter revenue of $30.1 million, a 3% increase from $29.2 million in the same quarter last year.

Operating income for the 2008 third quarter was $1.4 million, compared to $2.5 million in the 2007 third quarter. Non-GAAP (generally accepted accounting principles) operating income was $1.8 million, compared to $3.3 million in the third quarter of 2007. Non-GAAP operating income excludes charges for stock-based compensation of $439 000 and $812 000 in the third quarters of 2008 and 2007, respectively.

Net income in the 2008 third quarter was $924 000, with diluted earnings per share (EPS) of $0.05, compared to $3.0 million and $0.15, respectively, in the 2007 third quarter. Net income includes fully taxed earnings in 2008. Non-GAAP net income in the third quarter of 2008 was $2.0 million with EPS of $0.11, compared to $3.8 million and $0.19, respectively, in the 2007 third quarter. Non-GAAP net income excludes charges for stock-based compensation and non-cash tax expense.

“As in the previous quarter, demand was strong from new customers while current customers limited expansion of their existing implementations,” said Interactive Intelligence founder and CEO, Dr Donald E. Brown. “Both trends were primarily driven by the difficult economic environment. Organisations looking for immediate efficiencies selected our solutions while many existing customers face slower growth and have reduced capital expenditures. Since our technologies are particularly relevant during slow economic periods, we are responding to the current capital spending conditions by clearly articulating the strong returns on investment and value we deliver to our customers.”

For the nine months ended 30 September 2008, revenue was a record $90.1 million, a 12% increase from $80.6 million in the same period in 2007.

Operating income for the first nine months of 2008 was $4.1 million, compared to $6.1 million for the same period in 2007. For the first nine months of 2008, non-GAAP operating income was $6.4 million, compared to $8.4 million in 2007. Non-GAAP operating income excludes charges for stock-based compensation of $2.3 million in both 2008 and 2007.

Net income for the nine months ended 30 September 2008 was $2.9 million, with EPS of $0.15, compared to $7.1 million and $0.37, respectively, in the same period in 2007. Net income includes fully taxed earnings in 2008. Non-GAAP net income was $7.3 million with EPS of $0.38, compared to $9.4 million and $0.49, respectively, in the first nine months of 2007. Non-GAAP net income excludes charges for stock-based compensation and non-cash tax expense.

Cash and short-term investments as of 30 September 2008 totalled $49.3 million, up from $46.3 million on 31 December 2007. Cash flow from operations for the first nine months of 2008 was $11.4 million, compared to $9.8 million in the first nine months of 2007. During the third quarter of 2008, the company repurchased 353 000 shares of its common stock for $3.4 million under a plan that was approved by the board of directors in July 2008.

Interactive Intelligence hosted its 10th annual partner conference earlier this month at its headquarters' city in Indianapolis, Indiana. The conference attracted more than 190 reseller, consultant and analyst attendees. This year 19 resellers were honoured for their 10-year partnerships with Interactive Intelligence.

Product highlights during the quarter included the latest release of the company's Interaction SIP Proxy designed to increase reliability, improve security and simplify deployment for distributed enterprises and call centres.

To view complete financials, visit http://investors.inin.com/releaseDetail.cfm?ReleaseID=343288.

The non-GAAP measures shown in this release exclude non-cash stock-based compensation expense for stock options and non-cash income tax expense. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included after the financial information included in this press release. These measures are not in accordance with, or an alternative for, GAAP and may be different from non-GAAP measures used by other companies. Management believes that the presentation of non-GAAP results, when shown in conjunction with corresponding GAAP measures, provides useful information to management and investors regarding financial and business trends related to the company's results of operations. Further, management believes that these non-GAAP measures improve management's and investors' ability to compare the company's financial performance with historical periods because certain historical periods excluded stock-based compensation expense for stock options (prior to 2007) and income tax expense and benefits have varied significantly and are primarily non-cash. Interactive Intelligence's management uses these non-GAAP results to compare its performance to its peers in the software industry. Because stock-based compensation expense and non-cash income tax expense amounts can vary significantly between companies, it is useful to compare results excluding these amounts. Management also uses financial statements that exclude stock-based compensation expense related to stock options and non-cash income tax amounts for its internal budgets.