Cloud-based communications have been a huge innovation in the telecom industry, and the niche has opened the door to small players like Interactive Intelligence (NASDAQ:ININ) to compete against the largest providers of telecommunications services in the country. Yet coming into Monday afternoon's first-quarter earnings report, Interactive Intelligence had some investors wondering whether the company would be able to live up to its full potential, as it has struggled in its efforts toward reaching sustained profitability. In its latest results, Interactive Intelligence still lost money, but it gave some promising news that has investors more excited about its future. Let's take a closer look at Interactive Intelligence and what its results say about what lies ahead for the company.
Interactive Intelligence keeps building up business
Interactive Intelligence managed to give investors more than they bargained for in both sales and the bottom line. Revenue came in up 13% to $89.5 million, beating the 11% growth rate that most had expected to see. Interactive Intelligence lost just over $860,000 on an adjusted basis, working out to an adjusted loss of$0.04 per share, or double last year's figure. Yet investors had believed the company would post a loss that was a dime per share worse than it actually did.
Once again, Interactive Intelligence focused its growth efforts on recurring revenue sources. All told, recurring revenue jumped by a quarter, with a whopping 61% jump in cloud-subscription revenue. Meanwhile, revenue from licenses, hardware, and services combined to $35.2 million, down about 2% from year-ago levels.
Interactive Intelligence has done a good job wooing new customers. The company added 61 new customers during the quarter, with almost half of them related to its cloud business. Large contracts of more than a quarter million dollars were more plentiful, and despite the fact that Interactive Intelligence got two huge orders last year, the company still posted solid gains in its cloud space.
Interactive Intelligence founder and CEO Dr. Don Brown said positive things about the company. In addition to its sales gains, Brown said, "we saw improved efficiencies in our cloud delivery operations, increased sales to new customers, growth in the number of large transactions, healthy expansion sales, and an uptick in orders for our on-premises technology." Brown pointed to its ongoing pipeline of potential opportunities to get even faster growth ahead as particularly promising for the company going forward.
Can Interactive Intelligence keep up the pace?
Helping to drive future gains will be the PureCloud Collaborate offering, which Interactive Intelligence launched back in March. PureCloud has emerged as one of the foundations on which Interactive Intelligence hopes to build further offerings, with the eventual goal of providing wide-ranging unified communications to help its customers interact more efficiently. The company also thinks that having demonstrated skill at certain core areas, it can slowly expand beyond those niches into similar fields to boost its overall growth.
Interactive Intelligence is also looking northward to try to expand, tapping into the untouched potential of the Canadian market. The company opened a new office in Toronto as well as a data center in Montreal, and if those moves prove successful, further entries into Canada could pay off with similar success.
Interactive Intelligence responded favorably to the positive news, climbing 4% in after-hours trading following its announcement. In the long run, Interactive Intelligence appears on track to become consistently profitable and to keep building on its past success, and as long as the demand for the latest technology doesn't slow, Interactive Intelligence should have the ability to keep participating in the rally that has carried so many cloud-computing companies higher over the past several years.
Dan Caplinger owns shares of Apple. The Motley Fool recommends Apple and Interactive Intelligence. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.