SaaS Revenue Increases 9.6% and
Professional Services Revenue Increases 15.8% with GAAP
Profitability
Intellinetics, Inc. (NYSE American: INLX), a digital
transformation solutions provider, announced financial results for
the three and six months ended June 30, 2024.
2024 Second Quarter Financial Highlights
- Total Revenue increased 9.0% over the same period in 2023; the
growth in the second quarter was fully organic.
- Software as a Service revenue increased 9.6% over the same
period in 2023.
- “IPAS” (IntelliCloud Payables Automation System) continued its
commercialization; live reference accounts doubled to four in the
quarter and they are running smoothly. An additional three are
scheduled to go live in Q3 2024.
- Management believes IPAS will be the primary driver of the
Company’s SAAS growth going forward.
- Professional services revenue increased 15.8% over the same
period in 2023.
- Net income was $75,050, or $0.02 net income per basic and fully
diluted share, compared to net income of $135,734, or $0.03 per
basic and fully diluted share, for the same period in 2023.
- Adjusted EBITDA increased 7.1% to $698,217, compared to
$651,646 for the same period in 2023.
- Ended the quarter with $2,139,500 in debt principal, down from
$2,964,500 at December 31, 2023 after paying down $325,000 in the
quarter as a pre-payment. Year-to-date, Intellinetics has made
$825,000 in debt pre-payments, and expects to pay down another
$800,000 in Q3.
For the Quarter ended June
30,
2024
2023
Revenues:
Sale of software
$
14,933
$
63,646
Software as a service
1,400,591
1,277,918
Software maintenance services
353,966
349,139
Professional services
2,662,358
2,298,316
Storage and retrieval services
209,745
269,411
Total revenues
$
4,641,593
$
4,258,430
James F. DeSocio, President & CEO of Intellinetics, stated,
“We continue to grow SaaS revenue, overall recurring revenue, and
maintain solid profitability and cash generation while reducing our
leverage and investing in our sales and marketing capabilities.
Demand for our SaaS offerings remains robust, including encouraging
market reception to our new IPAS solution, and we are building our
SaaS-focused sales organization to take advantage of this
opportunity. The return on investment for IPAS customers is
typically well less than a year and the overall return is
financially compelling, creating a large addressable market. We
continue to believe that IPAS has the potential to rapidly expand
our recurring revenue and support sustainable, profitable growth
for years to come.”
“The quarter benefitted from excellent professional services
revenue that exceeded previous quarters, in fact, Q2 2024 was a
record revenue quarter,” continued DeSocio. “As discussed last
quarter, our largest professional services customer plans to
transition certain tasks performed by our document conversion
business from one office location to another location in a way that
could reduce annual revenue of our document conversion segment. The
amount of the future revenue reduction is still uncertain, and the
transition has been delayed by the customer with no clear timeline.
We are continuing to negotiate with the customer to mitigate the
impact of this future revenue reduction. In the meantime, the real
star of Q2 2024 was the management team in our Document Conversion
division. I’m extremely proud of how hard they’ve worked to grow
the business and scale our operations.”
“Year-to-date, the strong free cash flow has enabled us to
pre-pay $825,000 of our long-term debt so far this year, leaving us
with a debt principal balance of just $2.1 million at June 30,”
continued DeSocio. “We’ve accomplished this even as we’ve increased
our operating expenses with structural investments designed to help
us scale. We have implemented NetSuite to provide better visibility
and functionality into our financials and project profitability and
also grew our development team to expediate new product releases.
We intend to continue to reduce our leverage while further
investing in sales and marketing initiatives. Specifically, we’re
planning to prepay another $800,000 before the end of August. This
demonstrates the structural profitability of our business model. As
this strategy matures, we will be positioned for robust
profitability and sustainable growth, with a high
predictability.”
Summary – 2024 Second Quarter Results
Revenues for the three months ended June 30, 2024 were
$4,641,593, an increase of 9.0%, as compared with $4,258,430 for
the same period in 2023. This organic increase was driven by a 9.6%
increase in SaaS revenue, and a 15.8% increase in professional
services fees, partially offset by lower sales of storage and
retrieval and modest growth, at 1.4% as expected, in software
maintenance services. Recurring revenue grew 6.6% and represented
57% of total revenue.
Total operating expenses increased 23.4% to $2,830,873, compared
to $2,294,045, driven by higher non-cash depreciation and
amortization expenses including an incremental $135,900 related to
our issuance of restricted stock awards to employees, planned
investments in sales and marketing, and higher general and
administrative expenses. Income from operations was $172,106
compared to income from operations of $296,388 in the second
quarter last year.
Intellinetics reported net income of $75,050 compared to net
income of $135,734 for the same period in 2023. Basic and diluted
net income per share for the three months ended June 30, 2024 was
$0.02, compared to net income per share of $0.03 per basic and
fully diluted share for the period ended June 30, 2023. Adjusted
EBITDA was $698,217 compared to $651,646 in 2023.
Summary – 2023 Year-to-Date Results
Revenues for the six months ended June 30, 2024 were $9,148,677,
an increase of 8.3% compared to $8,445,263 for the same period in
2023. Total operating expenses increased 23.8% to $5,764,997
compared to $4,655,885. In addition to structural investments for
growth and scale, the primary driver of the expense increase was
$533,919 related to our issuance of restricted stock awards to
employees, a non-cash expense except for $69,525. Income from
operations was $137,626, compared to income from operations of
$580,387 last year. Intellinetics reported a net loss of $99,664,
or $(0.02) per basic and diluted share (inclusive of a $397,901
charge in the first quarter of 2024 related to restricted stock
awards), compared to net income of $248,297, or $0.06 per basic and
diluted share, for the same period in 2023. Adjusted EBITDA was
$1,371,579 compared to $1,281,525.
2024 Outlook
Based on management's current plans and assumptions, the Company
reiterated expectations that it will grow revenues on a
year-over-year basis for the fiscal year 2024, and revised
expectations for Adjusted EBITDA to decline modestly compared to
2023.
“Industry response to our SaaS solutions has given us confidence
that the time is right to meaningfully, but judiciously, upgrade
our sales and marketing investments,” commented Joe Spain, Chief
Financial Officer of Intellinetics. “Historically, we have
delivered reasonable growth with a relatively small sales
organization. The introduction of IPAS has significantly expanded
our addressable market and our potential customer base, and the
growing portfolio warrants a more robust presence at trade shows as
well as expanding our sales team. We are investing now to drive
accelerated, profitable growth in 2025 and beyond. As such, we are
now revising our guidance, and expect Adjusted EBITDA to decline
compared to 2023 levels, reflecting these investments.”
Conference Call
Intellinetics is holding a conference call to discuss these
results on a live webcast at 4:30 p.m. ET today. Interested parties
can access the webcast through the Intellinetics website at
https://ir.intellinetics.com/. Investors can also dial in to the
webcast by calling (877) 407-8133 (toll-free) or (201) 689-8040. A
replay of the call can also be accessed via phone through August
27, 2024 by dialing (877) 660-6853 (toll-free) or (201) 612-7415
and using replay access code 13748254.
About Intellinetics, Inc.
Intellinetics, Inc. (NYSE American: INLX) is enabling the
digital transformation. Intellinetics empowers organizations to
manage, store and protect their important documents and data. The
Company’s flagship solution, the IntelliCloud™ content management
platform, delivers advanced security, compliance, workflow and
collaboration features critical for highly regulated,
risk-intensive markets. IntelliCloud connects documents to users
and the processes they support anytime, anywhere to accelerate
innovation and empower organizations to think and work in new ways.
In addition, Intellinetics offers business process outsourcing
(BPO), document and micrographics scanning services, and records
storage. From highly regulated industries like Healthcare/Human
Service Providers, K-12, Public Safety, and State and Local
Governments, to businesses looking to move away from paper-based
processes, Intellinetics is the all-in-one, compliant, document
management solution. Intellinetics is headquartered in Columbus,
Ohio. For additional information, please visit
www.intellinetics.com.
Cautionary Statement
Statements in this press release which are not purely
historical, including statements regarding future business and
growth, increased sales and marketing efforts, future revenues,
including second quarter and full year results; organic revenue
growth from both new and existing customers; market share, growth
of our markets, and better results due to price increases;
sustainable profitability; the rollout and success of new products,
including IPAS; continued growth of SaaS revenue; expansion of
relationships with key customers; the timing and ongoing
negotiations relating to potential revenue reductions with our
largest professional services customer; execution of Intellinetics’
business plan, strategy, direction and focus; and other intentions,
beliefs, expectations, representations, projections, plans or
strategies regarding future growth, financial results, and other
future events are forward-looking statements. The forward-looking
statements involve risks and uncertainties including, but not
limited to, the risks and uncertainties related to a potential
revenue reduction from our largest professional services customer;
the risks associated with the effect of changing economic
conditions including inflationary pressures, challenges with hiring
and maintaining a stable workforce, Intellinetics’ ability to
execute on its business plan and strategy, customary risks
attendant to acquisitions, trends in the products markets,
variations in Intellinetics’ cash flow or adequacy of capital
resources, market acceptance risks, the success of Intellinetics’
solutions providers, including human services, health care, and
education, technical development risks, and other risks,
uncertainties and other factors discussed from time to time in its
reports filed with or furnished to the Securities and Exchange
Commission, including in Intellinetics’ most recent annual report
on Form 10-K as well as subsequently filed reports on Form 8-K.
Intellinetics cautions investors not to place undue reliance on the
forward-looking statements contained in this press release.
Intellinetics disclaims any obligation and does not undertake to
update or revise any forward-looking statements in this press
release. Expanded and historical information is made available to
the public by Intellinetics on its website at www.intellinetics.com
or at www.sec.gov.
Non-GAAP Financial Measures
Intellinetics uses non-GAAP Adjusted EBITDA as supplemental
measures of our performance that are not required by, or presented
in accordance with, accounting principles generally accepted in the
United States (GAAP). A non-GAAP financial measure is a numerical
measure of a company's financial performance that excludes or
includes amounts so as to be different from the most directly
comparable measure calculated and presented in accordance with GAAP
in the statement of income, balance sheet or statement of cash
flows of a company.
Adjusted EBITDA: Adjusted EBITDA is not a measurement of
financial performance under GAAP and should not be considered as an
alternative to net income, operating income, or any other
performance measure derived in accordance with GAAP, or as an
alternative to cash flow from operating activities or a measure of
our liquidity. Intellinetics urges investors to review the
reconciliation of non-GAAP Adjusted EBITDA to the comparable GAAP
Net Income, which is included in this press release, and not to
rely on any single financial measure to evaluate Intellinetics’
financial performance.
We believe that Adjusted EBITDA is a useful performance measure
and is used by us to facilitate a comparison of our operating
performance on a consistent basis from period-to-period and to
provide for a more complete understanding of factors and trends
affecting our business than measures under GAAP can provide alone.
We define “Adjusted EBITDA” as earnings before interest expense,
any income taxes, depreciation and amortization expense,
stock-based compensation, note conversion and note or equity offer
warrant or stock expense, gain or loss on debt extinguishment,
change in fair value of contingent consideration, and transaction
costs.
Reconciliation of Net Income to Adjusted EBITDA
For the Three Months Ended June
30,
2024
2023
Net income - GAAP
$
75,050
$
135,734
Interest expense, net
97,056
160,654
Depreciation and amortization
274,638
239,803
Stock-based compensation
251,473
115,455
Adjusted EBITDA
$
698,217
$
651,646
For the Six Months Ended June
30,
2024
2023
Net (loss) income - GAAP
$
(99,664
)
$
248,297
Interest expense, net
237,290
332,090
Depreciation and amortization
538,648
467,521
Stock-based compensation
695,305
233,617
Adjusted EBITDA
$
1,371,579
$
1,281,525
Recurring Revenue: Recognized revenue for any applicable
period that we characterize as being recurring in nature, without
regard to contract start or end dates or renewal rates. It includes
the following revenue types: SaaS subscription agreements,
maintenance contracts related to perpetual software licenses,
storage and retrieval services, and professional services revenues
in the nature of business process outsourcing. It excludes revenues
of a type that are not expected to recur, primarily perpetual
licenses, most document conversion services, and other professional
services that are project based. Recurring revenue is not
determined by reference to deferred revenue, unbilled revenue, or
any other GAAP financial measure over any period, so the Company
has not reconciled the Recurring Revenues to any GAAP measure.
Recurring revenue should not be extrapolated into a precise
prediction of future revenues, because it does not take into
account our contract start and end dates and our renewal rates.
Management believes that reviewing this metric, in addition to GAAP
results, helps investors and financial analysts understand the
value of Intellinetics’ recurring revenue streams versus prior
periods.
Reconciliation of revenues to recurring revenues:
For the Three Months Ended
June 30,
2024
2023
Revenues as reported:
Sale of software
$
14,933
$
63,646
Software as a service
1,400,591
1,277,918
Software maintenance services
353,966
349,139
Professional services
2,662,358
2,298,316
Storage and retrieval
209,745
269,411
$
4,641,593
$
4,258,430
Revenues - recurring only:
Sale of software - recurring
$
-
$
-
Software as a service - recurring
1,311,644
1,182,483
Software maintenance services -
recurring
353,966
349,139
Professional services - recurring
773,908
704,023
Storage and retrieval - recurring
190,303
230,609
$
2,629,821
$
2,467,066
Revenues - non-recurring only:
Sale of software - non-recurring
$
14,933
$
63,646
Software as a service - non-recurring
88,947
95,435
Software maintenance services -
non-recurring
-
-
Professional services - non-recurring
1,888,450
1,593,481
Storage and retrieval - non-recurring
19,442
38,802
$
2,011,772
$
1,791,364
Total recurring and non-recurring
revenues
$
4,641,593
$
4,258,430
Note 1 – Software as a service non-recurring revenue is
comprised of professional services setup fees which are recognized
ratably over the initial contract period. They do not renew, and
are therefore non-recurring. Under ASC 606, they are deemed
essential to the functionality of the subscription Software as a
service, and are therefore recognized together with the
subscription Software as a service revenue.
INTELLINETICS, INC. and
SUBSIDIARIES
Condensed Consolidated
Statements of Operations
(unaudited)
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2024
2023
2024
2023
Revenues:
Sale of software
$
14,933
$
63,646
$
20,712
$
78,939
Software as a service
1,400,591
1,277,918
2,805,744
2,516,350
Software maintenance services
353,966
349,139
711,949
698,681
Professional services
2,662,358
2,298,316
5,142,036
4,597,605
Storage and retrieval services
209,745
269,411
468,236
553,688
Total revenues
4,641,593
4,258,430
9,148,677
8,445,263
Cost of revenues:
Sale of software
1,125
7,344
6,190
15,525
Software as a service
217,586
258,382
433,578
479,022
Software maintenance services
13,364
15,117
29,074
31,833
Professional services
1,344,541
1,307,341
2,628,604
2,494,457
Storage and retrieval services
61,998
79,813
148,608
188,154
Total cost of revenues
1,638,614
1,667,997
3,246,054
3,208,991
Gross profit
3,002,979
2,590,433
5,902,623
5,236,272
Operating expenses:
General and administrative
2,025,796
1,561,939
4,154,289
3,116,550
Sales and marketing
530,439
492,303
1,072,060
1,071,814
Depreciation and amortization
274,638
239,803
538,648
467,521
Total operating expenses
2,830,873
2,294,045
5,764,997
4,655,885
Income from operations
172,106
296,388
137,626
580,387
Interest expense, net
(97,056
)
(160,654
)
(237,290
)
(332,090
)
Net income (loss)
$
75,050
$
135,734
$
(99,664
)
$
248,297
Basic net income (loss) per share:
$
0.02
$
0.03
$
(0.02
)
$
0.06
Diluted net income (loss) per share:
$
0.02
$
0.03
$
(0.02
)
$
0.06
Weighted average number of common shares
outstanding - basic
4,229,518
4,073,757
4,171,570
4,073,757
Weighted average number of common shares
outstanding - diluted
4,722,063
4,073,757
4,171,570
4,073,757
INTELLINETICS, INC. and
SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(unaudited)
June 30,
December 31,
2024
2023
ASSETS
Current assets:
Cash
$
1,680,669
$
1,215,248
Accounts receivable, net
1,449,188
1,850,375
Accounts receivable, unbilled
1,483,313
1,320,837
Parts and supplies, net
93,926
110,272
Contract assets
141,214
140,165
Prepaid expenses and other current
assets
335,380
367,478
Total current assets
5,183,690
5,004,375
Property and equipment, net
999,276
924,257
Right of use assets, operating
2,276,171
2,532,928
Right of use assets, finance
274,112
219,777
Intangible assets, net
3,654,183
3,909,338
Goodwill
5,789,821
5,789,821
Other assets
685,471
645,764
Total assets
$
18,862,724
$
19,026,260
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
340,298
$
194,454
Accrued compensation
540,237
337,884
Accrued expenses
160,947
164,103
Lease liabilities, operating - current
797,870
712,607
Lease liabilities, finance - current
66,000
49,926
Deferred revenues
2,755,185
2,927,808
Total current liabilities
4,660,537
4,386,782
Long-term liabilities:
Notes payable - net of current portion
1,467,312
2,209,242
Notes payable - related party
572,063
560,602
Lease liabilities, operating - net of
current portion
1,596,960
1,942,970
Lease liabilities, finance - net of
current portion
219,490
175,943
Total long-term liabilities
3,855,825
4,888,757
Total liabilities
8,516,362
9,275,539
Stockholders’ equity:
Common stock, $0.001 par value, 25,000,000
shares authorized; 4,230,806 and 4,113,621 shares issued and
outstanding at June 30, 2024 and December 31, 2023,
respectively
4,231
4,114
Additional paid-in capital
31,536,818
30,841,630
Accumulated deficit
(21,194,687
)
(21,095,023
)
Total stockholders’ equity
10,346,362
9,750,721
Total liabilities and stockholders’
equity
$
18,862,724
$
19,026,260
INTELLINETICS, INC. and
SUBSIDIARIES
Condensed Consolidated
Statements of Cash Flows
(unaudited)
For the Six Months Ended June
30,
2024
2023
Cash flows from operating activities:
Net (loss) income
$
(99,664
)
$
248,297
Adjustments to reconcile net (loss) income
to net cash provided by (used in) operating activities:
Depreciation and amortization
538,648
467,521
Bad debt (recovery) expense
(143
)
27,528
Loss on disposal of fixed assets
547
-
Amortization of deferred financing
costs
94,531
95,152
Amortization of debt discount
-
17,778
Amortization of right of use assets,
financing
34,954
14,959
Share based compensation
695,305
233,617
Changes in operating assets and
liabilities:
Accounts receivable
401,330
(233,431
)
Accounts receivable, unbilled
(162,476
)
(441,603
)
Parts and supplies
16,346
652
Prepaid expenses and other current
assets
31,049
(27,999
)
Accounts payable and accrued expenses
345,041
(22,062
)
Operating lease assets and liabilities,
net
(3,990
)
6,280
Deferred revenues
(172,623
)
(686,320
)
Total adjustments
1,818,519
(547,928
)
Net cash provided by (used in) operating
activities
1,718,855
(299,631
)
Cash flows from investing activities:
Capitalization of internal use
software
(198,051
)
(208,417
)
Purchases of property and equipment
(200,715
)
(82,684
)
Net cash used in investing activities
(398,766
)
(291,101
)
Cash flows from financing activities:
Payment of earnout liabilities
-
(700,000
)
Principal payments on financing lease
liability
(29,668
)
(12,312
)
Repayment of notes payable
(825,000
)
(262,950
)
Net cash used in financing activities
(854,668
)
(975,262
)
Net increase (decrease) in cash
465,421
(1,565,994
)
Cash - beginning of period
1,215,248
2,696,481
Cash - end of period
$
1,680,669
$
1,130,487
Supplemental disclosure of cash flow
information:
Cash paid during the period for
interest
$
160,813
$
226,570
Cash paid during the period for income
taxes
$
12,999
$
7,708
Supplemental disclosure of non-cash
financing activities:
Right-of-use asset obtained in exchange
for finance lease liability
$
89,289
$
-
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240813153206/en/
FNK IR Tom Baumann / Rob Fink 646.349.6641 / 646.809.4048
INLX@fnkir.com
Joe Spain, CFO Intellinetics, Inc. 614.921.8170
investors@intellinetics.com
Intellinetics (AMEX:INLX)
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