Why Shares of Interactive Intelligence, Inc. Cratered

Find out why!

Ashraf Eassa
Ashraf Eassa
Jul 16, 2014 at 11:35AM
Technology and Telecom

What: Shares of Interactive Intelligence, (NASDAQ:ININ), a provider of a software-based, multi-channel communications platform, was down over 16% during the July 16 trading session after warning that its Q2 revenues would come in the range of $78-80 million, below its prior guidance range of $86-$88 million. Operating loss is expected to be in the range of $6-$7 million on a non-GAAP basis, worse than prior expectations of breakeven.

So what: The new revenue range represents a modest year over year increase over the same quarter last year, during which the company saw sales of $76.2 million. The company states that driving this shortfall is the push-out of orders that were expected to be signed this quarter. Further, the company is deferring revenues from two major deals that were inked in prior periods that it had originally expected to recognize this quarter.

Now what: This new guidance range suggests that the company's growth is slowing significantly, which is alarming given that prior to the guidance cut the stock was trading for approximately 200 times this year's projected earnings and 128 times the following year's expected earnings. The underlying earnings estimates will come down and the share price is following.

The potential good news is that if these orders are merely delayed, then the numbers could be made up in future quarters. However, given the rich valuation and what now appears to be a slowing growth rate, there's very little room for error. As a result, I'm perfectly fine with staying on the sidelines for now.