Interactive Intelligence reports record fourth quarter 2007, fiscal year operating results

Interactive Intelligence (Nasdaq: ININ), a global provider of unified IP business communications solutions, reported record financial results for its fourth quarter and fiscal year ended 31 December 2007.

Revenue for the 2007 fiscal year totalled $109.9 million, up 32% from $83 million in 2006. Fourth quarter revenue was $29.3 million, a 23% increase from $23.9 million in the same quarter last year.

"Our growth was largely driven by the significant value proposition offered by our unique all-in-one communications software suite for contact centres and enterprises," said Interactive Intelligence CEO Dr Donald E Brown.

"We exceeded our original growth targets for the year, gained market share by growing faster than the overall market, and achieved a significant milestone by breaking through the $100 million revenue mark.

"Our results demonstrate that we continue to deliver great value to our customers as they make the transition to voice over IP. We added 93 new customers in the fourth quarter and 325 new customers for the year. We also gained increased recognition for our innovative technology as reflected in our positioning in the "Leaders Quadrant" of Gartner's 2007 Contact Centre Infrastructure report."

Net income for the 2007 fourth quarter was $10.3 million, with diluted earnings per share (EPS) of $0.53. These results include $840 000 of expense related to employee stock options, as well as a tax benefit of $8.1 million recorded to reduce the valuation allowance for deferred tax assets. Net income for the fourth quarter of 2006 was $1.6 million, with EPS of $0.08, including stock option expense of $539 000.

For the 2007 fourth quarter, non-GAAP (generally accepted accounting principles) net income was $3.1 million, or EPS of $0.16, compared to non-GAAP net income of $2.1 million, or EPS of $0.11, in the same quarter last year. The non-GAAP differences were due to exclusion of the non-cash income tax benefit recorded in the fourth quarter of 2007 and stock-based compensation expense recorded in both years.

Net income for the 2007 fiscal year was $17.5 million, with EPS of $0.91, up from 2006 fiscal year net income of $10.2 million, with EPS of $0.56. Net income for 2007 included expense for employee stock options of $3.1 million, as well as the tax benefit of $8.1 million recorded in the fourth quarter. Net income for 2006 included expense for employee stock options of $2.1 million, as well as a tax benefit of $5 million recorded in the third quarter to reduce the valuation allowance for deferred tax assets related to tax operating loss carry-forwards.

Non-GAAP net income for the 2007 fiscal year was $12.5 million, or EPS of $0.65, compared to non-GAAP net income of $7.4 million, or EPS of $0.40, in the 2006 fiscal year. The non-GAAP differences were due to exclusion of the non-cash income tax benefit and stock-based compensation expense recorded in both years.

Cash and short-term investments as of 31 December 2007 totalled $46.3 million, up from $27.1 million on 31 December 2006. Cash flow from operating activities for fiscal year 2007 was $20.2 million.

"We believe migration to VOIP continues to fuel our company's strong and steady growth," Brown said. "The latest version of our software, released in the fourth quarter of 2007, takes full advantage of this trend, with additional IP-related enhancements in the areas of security, ease-of-deployment, integration, and mobility.

"While cautious about 2008 given the current economic environment, we believe our competitive advantages will continue to drive revenue growth and are targeting an increase in revenue in 2008 of between 20% and 25%, along with operating margins, excluding stock option expenses, of between 10% and 11%."

The non-GAAP measures shown in this release exclude non-cash stock-based compensation expense for stock options and non-cash income tax benefits. 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, generally accepted accounting principles 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 these non-GAAP measures improve management's and investors' ability to compare the company's financial performance with historical periods because certain historical periods did not include stock-based compensation expense for stock options or the non-cash income tax benefits related to the reduction in the valuation allowance for the deferred tax assets.

Interactive Intelligence's management uses these non-GAAP results to compare its performance to its competitors in the software industry. Because stock-based compensation expense and non-cash tax benefits can vary significantly between companies, it is useful to compare results without these amounts. Management also uses financial statements that do not include stock-based compensation expense related for stock options or non-cash income tax benefits for its internal budgets.