Why Interactive Intelligence Group, Inc. Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Interactive Intelligence Group, (NASDAQ: ININ  ) jumped nearly 14% Thursday after the company's fourth-quarter results crushed expectations.

So what: Quarterly sales grew 29% year over year, to $90.8 million, which translated to slightly lower adjusted net income of $0.26 per diluted share. Both numbers handily beat Wall Street's estimates, which called for earnings of just $0.08 per share on sales of $77.52 million.

Now what: Going forward, Interactive Intelligence also told investors to expect full-year 2014 sales to grow around 15% to between $365 and $370 million, with non-GAAP earnings per share of $0.15 to $0.36. By contrast, analysts were modeling 2014 earnings of $0.61 per share on sales of $352.36 million. 

The bottom-line guidance miss may sound bad, but keep in mind that management insists it's merely the result of a faster-than-expected shift in revenue toward the company's lower margin cloud offerings.

CEO Donald Brown explained, "As we've stated previously, our main objective is to grow orders as rapidly as we can, especially cloud orders, even if doing so decreases our apparent profitability in the short run." Brown later went on to confirm that they're "now in a position to realize operational efficiencies that will allow us to increase the profitability of our cloud operations in 2015 and beyond."

In the end, while this stock may not look cheap based on traditional metrics, I can't blame investors for bidding up the price today. As long as Interactive Intelligence Group can continue delivering top-line growth while promising eventual margin improvements down the road, the stock could still prove a bargain for patient long-term investors.

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