ININ Interactive Intelligence Grp., Inc.

Interactive Intelligence (Nasdaq: ININ), a global provider of unified IP business communications solutions, has announced operating results for the three months ended March 31, 2009.

The company reported revenues of $29.5 million, equal to the revenues for the first quarter of 2008.

Net income, on a generally accepted accounting principles (GAAP) basis, was $1.2 million, or diluted earnings per share (EPS) of $0.07, compared to $1.1 million, or EPS of $0.06 in the first quarter of 2008. Net income on a non-GAAP* basis was $2.9 million, or EPS of $0.16, compared to $2.9 million, or EPS of $0.15 for the same quarter of last year.

Cash and investment balances as of March 31, 2009 totaled $49.8 million with no debt.

�Although product revenues were a challenge in the first quarter of 2009, we had a number of positive outcomes,� said Interactive Intelligence founder and CEO, Dr. Donald E. Brown. �Our services revenues, including communications-as-a-service and managed services, showed strong growth and non-GAAP operating income was up 30 percent. Cash and investments increased nicely to nearly $50 million.

�Despite the cautious buying market, our performance enables continued focus on the long-term initiatives of our company, including the development and launch of our process automation solution, and further expansion of our services business.�

Additional first quarter operating results include:

• Consistent gross margins of 69 percent for 2009 and 2008;
• GAAP operating income of $2.3 million in 2009, compared to $1.5 million in 2008;
• Non-GAAP operating income of $3.1 million in 2009, compared to $2.4 million in 2008;
• Interest income of $108,000 in 2009, compared to $459,000 in 2008;
• Other expense principally related to foreign exchange losses on receivables of $298,000 in 2009, compared to a gain of $97,000 in 2008; and
• Cash flows from operations of $4.4 million in 2009, compared to $5.3 million in 2008.

Non-GAAP net income and EPS exclude charges for stock-based compensation of $847,000, or EPS of $0.05, and non-cash income tax expense of approximately $799,000, or EPS of $0.04 for the first quarter of 2009 and charges for stock-based compensation of $932,000, or EPS of $0.05, and non-cash income tax expense of $821,000, or EPS of $0.04 for the first quarter of 2008.

Non-financial highlights from the first quarter of 2009 include the following:

• Positioned in �Leaders Quadrant� of the Gartner 2008 Contact Center Infrastructure, Worldwide Magic Quadrant report;
• Rated �Top Unified Communications Vendor� by North American contact centers in the Datamonitor 2008 Contact Center Investments in Developed Markets report;
• Received �Product of the Year� awards from Customer Interaction Solutions and INTERNET TELEPHONY magazines;
• Launched new communications system monitoring product to help customers improve operational efficiencies and increase reliability;
• Launched new packaged, fixed-price services;
• Announced integration with IBM Lotus Sametime; and
• Launched new �Unified IP Business Communications Technology� blog to reinforce industry thought-leadership and strengthen customer relationships.

Interactive Intelligence will host a conference call April 27 at 4:30 p.m. Eastern Time (EDT), featuring Dr. Brown and the company�s CFO, Stephen R. Head. There will be a live Q&A session following opening remarks.

To access the teleconference, please dial 1 877.857.6161 at least five minutes prior to the start of the call. Ask for the teleconference by the following name: "Interactive Intelligence first quarter earnings call."

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

About Interactive Intelligence

Interactive Intelligence Inc. (Nasdaq: ININ) is a global provider of unified business communications solutions for contact center automation, enterprise IP telephony, and enterprise messaging. The company was founded in 1994 and has more than 3,000 customers worldwide. Interactive Intelligence is among Software Magazine�s top 500 global software and services suppliers, is ranked among NetworkWorld�s top 200 North American networking vendors, is a BusinessWeek �hot growth 50� company, and is among FORTUNE Small Business magazine�s top 100 fastest growing companies. The company is also positioned in the leaders quadrant of the Gartner 2008 Contact Center Infrastructure, Worldwide Magic Quadrant report. Interactive Intelligence employs approximately 600 people and is headquartered in Indianapolis, Indiana. It has six global corporate offices with additional sales offices throughout North America, Europe, Middle East, Africa and Asia Pacific. Interactive Intelligence can be reached at +1 317.872.3000 or info@inin.com; on the Net: http://www.inin.com.

* Non-GAAP Measures

The non-GAAP measures shown in this release exclude non-cash stock-based compensation expense for stock options and non-cash income tax expense. 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, GAAP and may be different from non-GAAP measures used by other companies. Stock-based compensation expense is non-cash and income tax expense is primarily non-cash. 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 that these non-GAAP measures improve management�s and investors� ability to compare the company�s financial performance with other companies in the technology industry and Interactive Intelligence�s management uses these non-GAAP results to compare its performance to its peers in the software industry. Because stock-based compensation expense and non-cash income tax expense amounts can vary significantly between companies, it is useful to compare results excluding these amounts. Management also uses financial statements that exclude stock-based compensation expense related to stock options and non-cash income tax amounts for its internal budgets.

This release contains certain forward-looking statements that involve a number of risks and uncertainties. Among the factors that could cause actual results to differ materially are the following: rapid technological changes in the industry; the company's ability to maintain profitability; to manage successfully its growth and increasingly complex third-party relationships; to maintain successful relationships with its current and any new partners; to maintain and improve its current products; to develop new products; to protect its proprietary rights adequately; and other factors described in the company's SEC filings, including the company's latest annual report on Form 10-K.

Interactive Intelligence Inc. is the owner of the marks INTERACTIVE INTELLIGENCE, its associated LOGO and numerous other marks. All other trademarks mentioned in this document are the property of their respective owners.

� Interactive Intelligence, Inc. Condensed Consolidated Statements of Income (in thousands, except per share amounts) Unaudited � � � Three Months Ended March 31, 2009 2008 Revenues: Product $ 13,050 $ 14,845 Services � 16,426 � � 14,638 � Total revenues � 29,476 � � 29,483 � Costs of revenues: Product 3,528 3,130 Services � 5,502 � � 5,897 � Total cost of revenues � 9,030 � � 9,027 � Gross profit � 20,446 � � 20,456 � Operating expenses: Sales and marketing 9,233 10,178 Research and development 5,626 4,965 General and administrative � 3,296 � � 3,827 � Total operating expenses � 18,155 � � 18,970 � Operating income 2,291 1,486 Other income (expense): Interest income, net 108 459 Other income (expense) � (298 ) � 97 � Total other income (expense) � (190 ) � 556 � Income before income taxes 2,101 2,042 Income tax expense � (878 ) � (925 ) Net income $ 1,223 � $ 1,117 � � Net income per share: Basic $ 0.07 $ 0.06 Diluted 0.07 0.06 � Shares used to compute net income per share: Basic 16,948 17,940 Diluted 17,635 19,216 � � Interactive Intelligence, Inc. Reconciliation of Supplemental Financial Information (in thousands, except per share amounts) Unaudited � � Three Months Ended March 31, 2009 2008 � Net income, as reported $ 1,223 $ 1,117 Non-cash stock-based compensation expense: Cost of services 65 72 Sales and marketing 308 362 Research and development 245 208 General and administrative � 229 � 290 Total � 847 � 932 Non-cash income tax benefit � 799 � 821 Non-GAAP net income $ 2,869 $ 2,870 � Operating income, as reported $ 2,291 $ 1,486 Non-cash stock-based compensation expense � 847 � 932 Non-GAAP operating income $ 3,138 $ 2,418 � Diluted EPS, as reported $ 0.07 $ 0.06 Non-cash stock-based compensation expense 0.05 0.05 Non-cash income tax expense � 0.04 � 0.04 Non-GAAP diluted EPS $ 0.16 $ 0.15 � � Interactive Intelligence, Inc. Condensed Consolidated Balance Sheets (in thousands) � � � � March 31, December 31, 2009 2008 (unaudited) Assets Current assets: Cash and cash equivalents $ 45,930 $ 34,705 Short-term investments 3,901 10,805 Accounts receivable, net 23,318 27,533 Deferred tax assets, net 6,017 6,017 Prepaid expenses 5,064 5,507 Other current assets � 2,812 � � 1,995 � Total current assets 87,042 86,562 Property and equipment, net 10,024 10,762 Deferred tax assets, net 4,466 5,136 Other assets, net � 2,651 � � 2,723 � Total assets $ 104,183 � $ 105,183 � � Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 10,161 $ 11,361 Accrued compensation and related expenses 2,529 3,486 Deferred product revenues 4,273 4,754 Deferred services revenues � 31,434 � � 31,457 � Total current liabilities 48,397 51,058 Noncurrent deferred revenue � 6,287 � � 6,878 � Total liabilities � 54,684 � � 57,936 � � Shareholders' equity: Preferred stock - - Common stock 170 169 Treasury stock (9,505 ) (9,714 ) Additional paid-in-capital 84,522 83,604 Accumulated deficit � (25,688 ) � (26,812 ) Total shareholders' equity � 49,499 � � 47,247 � Total liabilities and shareholders' equity $ 104,183 � $ 105,183 � � � Interactive Intelligence, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) Unaudited � � � � Year Ended March 31, 2009 2008 � Operating activities: Net income $ 1,223 $ 1,117

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation 1,055 795 Stock-based compensation expense 847 932 Deferred income tax 670 821 Accretion of investment income 5 (4 ) Changes in operating assets and liabilities: Accounts receivable 4,215 154 Prepaid expenses 443 (782 ) Other current assets (817 ) 159 Other assets 72 32 Accounts payable and accrued liabilities (1,251 ) 1,871 Accrued compensation and related expenses (957 ) (1,056 ) Deferred product revenues (413 ) 116 Deferred services revenues � (682 ) � 1,190 � Net cash provided by operating activities � 4,410 � � 5,345 � � Investing activities: Sales of available-for-sale investments 7,800 11,200 Purchases of available-for-sale investments (897 ) (6,604 ) Purchases of property and equipment (266 ) (2,583 ) Unrealized loss on investment � (2 ) � - � Net cash provided by investing activities � 6,635 � � 2,013 � � Financing activities: Proceeds from stock options exercised 111 282 Proceeds from issuance of common stock � 69 � � 62 � Net cash provided by financing activities � 180 � � 344 � Net increase in cash and cash equivalents 11,225 7,702 Cash and cash equivalents, beginning of period � 34,705 � � 29,359 � Cash and cash equivalents, end of period $ 45,930 � $ 37,061 � � Cash paid during the period for: Income taxes $ 150 $ 128 � Other non-cash item: Purchases of property and equipment payable at end of period $ (51 ) $ (477 ) �

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