Interactive Intelligence reports record Q2 operating results

Interactive Intelligence Inc, a global developer of business communications software, today reported record operating results for its second quarter ending 30 June 2006.

Revenues in the second quarter of 2006 were $19.3 million, up 23% from $15.6 million in the second quarter of 2005, and up 7% compared to $17.9 million for the first quarter of 2006.

Net income for the second quarter, calculated in accordance with US generally accepted accounting principles (GAAP), was $962 000 with diluted earnings per share (EPS) of $0.05, compared to net income of $290 000 and EPS of $0.02 in the second quarter of 2005.

Excluding stock-based compensation expense, 2006 second quarter net income was $1.6 million with EPS of $0.09. A reconciliation of GAAP operating results to non-GAAP results, which exclude the recording of stock-based compensation expense for employee stock options, is included in an attached schedule.

Revenues for the six months ended 30 June 2006 were $37.2 million, up 23% from $30.2 million in the same period in 2005. Net income for the six months ended 30 June 2006, calculated in accordance with GAAP, was $2 million with EPS of $0.11, compared to $315 000 with EPS of $0.02 in the first half of 2005.

Excluding stock-based compensation expense, net income for the six months ended 30 June 2006 was $3.1 million, with EPS of $0.18. A reconciliation of GAAP operating results to non-GAAP results is included in an attached schedule.

Cash and short-term investments as of 30 June 2006 totalled $20.2 million, up from $15.1 million on 31 December 2005, and cash flow from operating activities in the first six months of 2006 was $4.3 million, compared to the use of $63 000 from operations in the same period last year.

"These results mark not only a new quarterly revenue record, but our third consecutive quarter of more than 20% revenue growth and our tenth consecutive quarter of profitability," said Interactive Intelligence CEO, Dr Donald E Brown. "Our operating margin was significantly higher than the same quarter last year. We believe we have good momentum moving into the second half of 2006 with exciting new product releases, innovative branding and lead generation campaigns, and a strong sales pipeline."

New and add-on customer orders received in the second quarter included Bass Pro Shops, Brandhouse Beverages (a joint venture between Diageo and Heineken), Celtel International, Gauteng Shared Services Centre, ITV Direct, LTD, Mondial Assistance Netherlands, National FFA Organization, Shiseido America, SurfControl, XLNT Marketing, and others.

The company made two significant product announcements during the quarter. In May the company introduced a new workforce management software application, Interaction Optimizer. According to industry analyst firm Yankee Group, the market for workforce management currently exceeds $200 million.

"This is a strategic move for Interactive Intelligence with great potential," said Yankee Group senior analyst, Ken Landoline. "Many smaller and mid-sized contact centres have never made the investment because of the perceived complexity of integrating workforce management with the ACD. Interaction Optimizer offers advanced features such as multimedia support and makes the deployment very easy for customers."

In June, Interactive Intelligence released an enhanced version of its multi-site call routing software essential for companies experiencing increased demand for cost-effective disaster recovery strategies. According to a recent Gartner report, "some high visibility disasters (for example, Hurricane Katrina) and the continued pressure of compliance and regulation have increased the pressure on mid-market CIOs to find a way to make their businesses more resilient" (Midsize Businesses Spending In New Technology Areas, James A Browning, 13 July 2006).

Interactive Intelligence also continued to receive recognition as a leader in the voice over IP market. In addition to certifying the company`s IP-based contact centre automation software, independent test lab, Miercom, praised this solution in a June Business Communications Review article, saying, "In Interactive`s case, SIP is not only the de facto open standard for VOIP, but the latest enabler of new, productivity-enhancing communications applications."

Second quarter awards included Network Computing magazine`s Well-Connected Award for the company`s unified communications and messaging software. In addition, the company was ranked for the third year in a row among Network World magazine`s top 200 network companies in North America with a compound annual growth rate from 2001 to 2005 exceeding that of its three largest competitors.

Interactive Intelligence will host a conference call today at 4.30pm EDT, featuring Dr Donald E Brown and the company`s chief financial officer, Stephen R Head. There will be a live Q&A session following opening remarks. The teleconference is expected to last approximately 45 minutes.

To access the teleconference, please dial 1 800 633 8414 at least five minutes prior to the start of the call. Ask for the teleconference by the following name: "Interactive Intelligence second quarter earnings call."

The teleconference will also be broadcast live on the company`s investor relations` page at http://www.inin.com/investors. An archive of the teleconference will be posted following the call.