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.
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