A downtrend has been apparent in Intellinetics, Inc. (INLX) lately. While the stock has lost 13.1% over the past week, it could witness a trend reversal as a hammer chart pattern was formed in its last trading session. This could mean that the bulls have been able to counteract the bears to help the stock find support.The formation of a hammer pattern is considered a technical indication of nearing a bottom with likely subsiding of selling pressure. But this is not the only factor that makes a bullish case ...

Core Viewpoint - Intellinetics, Inc. reported a quarterly loss of $0.13 per share, which was better than the Zacks Consensus Estimate of a loss of $0.16, representing an earnings surprise of +18.75% [1] Financial Performance - The company posted revenues of $4.01 million for the quarter ended June 2025, missing the Zacks Consensus Estimate by 5.62% and down from $4.64 million a year ago [2] - Over the last four quarters, Intellinetics has surpassed consensus EPS estimates only once [2] Stock Performance - Intellinetics shares have declined approximately 23.7% since the beginning of the year, while the S&P 500 has gained 9.6% [3] - The current Zacks Rank for Intellinetics is 4 (Sell), indicating expected underperformance in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is -$0.10 on revenues of $4.81 million, and for the current fiscal year, it is -$0.53 on revenues of $18.1 million [7] - The trend of estimate revisions for Intellinetics was unfavorable prior to the earnings release [6] Industry Context - The Internet - Content industry, to which Intellinetics belongs, is currently in the bottom 20% of the Zacks Industry Rank, suggesting potential challenges ahead [8]

Financial Data and Key Metrics Changes - Total revenue for Q2 2025 decreased by 13.6% to $4 million compared to $4.6 million in Q2 2024 [13] - SaaS revenue grew by 12.6% to $1.6 million from $1.4 million year-over-year, driven by early payables automation successes [13] - Professional services revenue decreased by 29% to $1.9 million from $2.7 million in the same period last year [14] - Net loss for Q2 was $568,000 compared to net income of $75,000 in Q2 2024, with loss per share at $0.13 [16] - Adjusted EBITDA was $28,000 compared to $698,000 for the same period in 2024 [17] Business Line Data and Key Metrics Changes - SaaS revenue, including hosting, showed growth of 12.6% [13] - Software maintenance services revenue decreased by 6.6% [14] - Professional services revenue constituted 49% of total revenue for the quarter, down from 56% last year [14] - Consolidated gross margin increased by 328 basis points to 68% [15] Market Data and Key Metrics Changes - Key vertical markets such as construction and homebuilding faced challenges due to higher interest rates and tariffs, leading to longer sales cycles [8] - K-12 education sector is experiencing concerns due to cuts in public education, affecting sales timelines [8] Company Strategy and Development Direction - The company aims to expand sales through various channels and has rebuilt its backlog of orders to historical levels [6] - Investments in sales and marketing are prioritized to enhance customer lifecycle management [9] - The company is committed to leveraging AI across three core pillars: new features, marketing and customer support, and internal development efficiencies [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about renewed customer activity and expects a strong fourth quarter [9] - The company anticipates SaaS revenue growth and positive adjusted EBITDA despite a projected decline in overall revenue for 2025 compared to 2024 [18] - Management believes in the strength of their competitive position and plans to reinvest cash flow into sales and development [39] Other Important Information - The company has successfully paid off $7.6 million in debt and earn-outs, positioning itself for growth investments [12] - The June 1 contract renewal with the largest customer includes price increases, which may improve margins [24] Q&A Session Summary Question: Should margins for professional services return to historic levels? - Management indicated that margins are expected to be a little better than historical levels due to the June 1 contract renewal [22][24] Question: How many customers in the homebuilder sector are live or paused? - Management reported that a high percentage of customers are live and moving aggressively towards go-live dates, with no dissatisfaction reported [26][27] Question: Expectations for SaaS growth moving forward? - Management acknowledged the 12.6% growth but expressed confidence in achieving better results, citing a strong pipeline and new product launches [28][29] Question: Progress in entering new verticals? - Management confirmed ongoing efforts to engage new partners and expand into new verticals, although progress has been slower than desired [34]

PART I FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=ITEM%201.%20Financial%20Statements.) Intellinetics' financial statements show decreased assets and liabilities, a widened net loss of $1.30 million, and a 9.7% revenue decline for H1 2025 [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $17.16 million, liabilities fell to $5.59 million due to debt repayment, and equity rose to $11.56 million Condensed Consolidated Balance Sheet Highlights (in USD) | Account | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | **Total Current Assets** | $4,602,726 | $5,474,556 | ($871,830) | | Cash | $2,071,475 | $2,489,236 | ($417,761) | | **Total Assets** | **$17,158,385** | **$18,574,956** | **($1,416,571)** | | **Total Current Liabilities** | $4,678,795 | $6,597,773 | ($1,918,978) | | Notes payable - current | $0 | $1,297,448 | ($1,297,448) | | **Total Liabilities** | **$5,594,713** | **$7,943,201** | **($2,348,488)** | | **Total Stockholders' Equity** | **$11,563,672** | **$10,631,755** | **$931,917** | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2025 saw a net loss of $567,590 on 13.6% lower revenues, while H1 2025 net loss widened to $1.30 million with a 9.7% revenue drop Three Months Ended June 30, Performance (in USD) | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenues | $4,010,813 | $4,641,593 | -13.6% | | Gross Profit | $2,726,557 | $3,002,979 | -9.2% | | (Loss) Income from Operations | ($508,478) | $172,106 | -395.4% | | Net (Loss) Income | ($567,590) | $75,050 | -856.3% | | Diluted EPS | ($0.13) | $0.02 | -750.0% | Six Months Ended June 30, Performance (in USD) | Metric | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenues | $8,258,158 | $9,148,677 | -9.7% | | Gross Profit | $5,595,757 | $5,902,623 | -5.2% | | (Loss) Income from Operations | ($1,193,037) | $137,626 | -966.9% | | Net (Loss) Income | ($1,295,155) | ($99,664) | -1200.0% | | Diluted EPS | ($0.31) | ($0.02) | -1450.0% | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) H1 2025 operating cash flow significantly decreased to $112,521, leading to an overall cash decrease of $417,761 Six Months Ended June 30, Cash Flow Summary (in USD) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $112,521 | $1,788,381 | | Net cash used in investing activities | ($471,904) | ($398,766) | | Net cash used in financing activities | ($58,378) | ($924,194) | | **Net (decrease) increase in cash** | **($417,761)** | **$465,421** | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail segment operations, accounting policies, significant customer concentration, and the full repayment of all outstanding notes payable - The company operates through two reporting segments: Document Management (software solutions) and Document Conversion (services to convert documents, primarily paper to digital)[24](index=24&type=chunk) - All outstanding notes payable to both unrelated and related parties were fully prepaid on June 18, 2025[64](index=64&type=chunk)[67](index=67&type=chunk) - The company has significant customer concentration risk, with the **State of Michigan accounting for 40% of total revenues** for the six months ended June 30, 2025, and 45% for the same period in 2024[83](index=83&type=chunk) Segment Revenue and Gross Profit (Six Months Ended June 30) | Segment | Revenue 2025 | Revenue 2024 | Gross Profit 2025 | Gross Profit 2024 | | :--- | :--- | :--- | :--- | :--- | | Document Management | $3,961,838 | $3,679,508 | $3,414,744 | $3,175,430 | | Document Conversion | $4,296,320 | $5,469,169 | $2,181,013 | $2,727,193 | | **Total** | **$8,258,158** | **$9,148,677** | **$5,595,757** | **$5,902,623** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management discusses H1 2025 revenue decline due to customer volume and sales cycles, increased operating expenses, and debt repayment [Executive Overview of Results](index=25&type=section&id=Executive%20Overview%20of%20Results) H1 2025 revenues decreased 9.7% to $8.26 million, with SaaS growth offset by a $1.30 million net loss due to volume and sales cycle issues - Revenue decline was caused by a temporary volume reduction in the document conversion segment before a major contract renewal and longer sales lead times in the document management segment due to economic uncertainty[94](index=94&type=chunk) Key Financial Results for Six-Month Period 2025 | Metric | H1 2025 | YoY Change | | :--- | :--- | :--- | | Revenues | $8,258,158 | -9.7% | | SaaS Revenues | $3,119,273 | +11.2% | | Cost of Revenues | $2,662,401 | -18.0% | | Operating Expenses | $6,788,794 | +17.8% | | Loss from Operations | ($1,193,037) | N/A (vs. income of $137,626) | | Net Loss | ($1,295,155) | N/A (vs. loss of $99,664) | [Results of Operations](index=27&type=section&id=Results%20of%20Operations) H1 2025 revenues declined 9.7% due to professional services, offset by SaaS growth, while gross profit margin improved and operating expenses rose - **SaaS revenues increased by 11.2%** in H1 2025 compared to H1 2024, primarily due to new payables automation customers[102](index=102&type=chunk) - Professional services revenues decreased by **21.4%** in H1 2025, mainly from reduced scanning projects in the Document Conversion segment related to the timing of a contract renewal with its largest customer[103](index=103&type=chunk) - Overall gross profit percentage increased from **64.5% in H1 2024 to 67.8% in H1 2025**, attributed to a favorable revenue mix with a higher proportion of high-margin SaaS revenue[107](index=107&type=chunk) - Operating expenses rose due to investments in scaling, including expanded SOC2 processes, a larger development team, and an expanded sales team[112](index=112&type=chunk)[115](index=115&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) The company holds $2.1 million in cash, fully repaid debt in June 2025, and believes current capital resources are sufficient for 12 months - The company had **$2.1 million in cash and cash equivalents** as of June 30, 2025[120](index=120&type=chunk) - All outstanding notes payable were repaid in full on June 18, 2025[122](index=122&type=chunk) - The company initiated an 'at-the-market' (ATM) offering program, with approximately **$8.2 million remaining available** as of the filing date[121](index=121&type=chunk) - Net cash provided by operating activities for H1 2025 was **$112,521**, a significant decrease from $1,788,381 in H1 2024[124](index=124&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) This section is not applicable as Intellinetics, Inc. is classified as a smaller reporting company - Not applicable to smaller reporting companies[129](index=129&type=chunk) [Controls and Procedures](index=29&type=section&id=ITEM%204.%20Controls%20and%20Procedures.) Management concluded the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control - Management concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective[131](index=131&type=chunk) - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[133](index=133&type=chunk) PART II OTHER INFORMATION [Legal Proceedings](index=30&type=section&id=ITEM%201.%20Legal%20Proceedings.) The company reported no legal proceedings during the period - None[136](index=136&type=chunk) [Risk Factors](index=30&type=section&id=ITEM%201A.%20Risk%20Factors.) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - There have been no material changes to the risk factors from the Annual Report on Form 10-K for the fiscal year ended December 31, 2024[137](index=137&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) The company reported no unregistered sales of equity securities during the period - None[138](index=138&type=chunk) [Other Information](index=30&type=section&id=ITEM%205.%20Other%20Information.) No director or officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter - No director or officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter[141](index=141&type=chunk) [Exhibits](index=30&type=section&id=ITEM%206.%20Exhibits.) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including the At the Market Offering Agreement, the contract with the State of Michigan, and various officer certifications

[Executive Summary](index=1&type=section&id=Executive%20Summary) [2025 Second Quarter Highlights](index=1&type=section&id=2025%20Second%20Quarter%20Highlights) Intellinetics faced a total revenue decline in Q2 2025, primarily due to a significant reduction in professional services revenue, despite SaaS growth, reporting a net loss and a substantial decrease in Adjusted EBITDA, but successfully repaid all outstanding debt early 2025 Second Quarter Revenue Overview | Revenue Category | Q2 2025 | Q2 2024 | | :---------------------- | :------------- | :------------- | | Software as a service | $1,577,104 | $1,400,591 | | Software maintenance services | $330,459 | $353,966 | | Professional services | $1,899,619 | $2,677,291 | | Storage and retrieval services | $203,631 | $209,745 | | **Total Revenues** | **$4,010,813** | **$4,641,593** | - SaaS revenue increased by **12.6% year-over-year**[5](index=5&type=chunk) - Professional services revenue decreased by **29.0% year-over-year**[5](index=5&type=chunk) - Total revenues decreased by **13.6% year-over-year**[5](index=5&type=chunk) - Net loss of **$567,590** (or **$0.13 per share**), compared to net income of **$75,050** (or **$0.02 per share**) in Q2 2024[5](index=5&type=chunk) - Adjusted EBITDA was **$27,573**, down from **$698,217** in Q2 2024[5](index=5&type=chunk) - All outstanding notes were repaid early in June[5](index=5&type=chunk) - Cash balance at quarter-end was approximately **$2.1 million**[5](index=5&type=chunk) [CEO Commentary & Strategic Focus](index=1&type=section&id=CEO%20Commentary%20%26%20Strategic%20Focus) The CEO attributes the temporary decline in professional services revenue to contract timing, expecting production to normalize in Q3 with higher gross margins from new contracts, while focusing on SaaS growth through increased staffing and targeted sales, and enhancing financial flexibility by early debt repayment - Temporary decline in professional services revenue was due to the timing of contract renewals with the largest customer, now recovering[4](index=4&type=chunk) - Q3 production is returning to historical levels, with existing orders extending through **Q1 2026**[4](index=4&type=chunk) - Renewed contracts include price increases, expected to drive incremental gross margins in the second half of the year[4](index=4&type=chunk) - Company focuses on SaaS revenue growth, which increased by **12.6% year-over-year**, with increased staffing to drive further growth[5](index=5&type=chunk)[6](index=6&type=chunk) - Payables Automation solution is anticipated to be a key driver for SaaS growth[6](index=6&type=chunk) - All outstanding debt was repaid early in June, improving future cash flow and flexibility[5](index=5&type=chunk) [Financial Performance Overview](index=3&type=section&id=Financial%20Performance%20Overview) [Summary – 2025 Second Quarter Results](index=3&type=section&id=Summary%20%E2%80%93%202025%20Second%20Quarter%20Results) In Q2 2025, total revenue decreased by 13.6% year-over-year, primarily due to a 29.0% reduction in professional services revenue, despite a 12.6% increase in SaaS revenue, while operating expenses rose by 14.3% due to sales and marketing investments and IT enhancements, resulting in an operating loss and net loss - Total revenues were **$4,010,813**, a **13.6% year-over-year decrease**[7](index=7&type=chunk) - Professional services revenue decreased by **29.0%**, offsetting a **12.6% increase** in SaaS revenue[7](index=7&type=chunk) - Total operating expenses increased by **14.3%** to **$3,235,035**, driven by sales and marketing investments and IT/control environment enhancements[8](index=8&type=chunk) - Operating loss was **$508,478**, compared to operating income of **$172,106** in the prior year period[9](index=9&type=chunk) - Net loss was **$567,590** (or **$0.13 per share**), compared to net income of **$75,050** (or **$0.02 per share**) in the prior year period[9](index=9&type=chunk) - Adjusted EBITDA was **$27,573**, compared to **$698,217** in Q2 2024[9](index=9&type=chunk) [Summary – 2025 Year-to-Date Results](index=3&type=section&id=Summary%20%E2%80%93%202025%20Year-to-Date%20Results) For the six months ended June 30, 2025, total revenue decreased by 9.7% year-over-year, primarily due to a 21.4% decline in professional services revenue, while operating expenses increased by 17.8% due to growth investments and higher share-based compensation, leading to an expanded operating loss and significantly increased net loss - Total revenues were **$8,258,158**, a **9.7% year-over-year decrease**[10](index=10&type=chunk) - Professional services revenue decreased by **21.4%**, offsetting an **11.2% increase** in SaaS revenue[10](index=10&type=chunk) - Total operating expenses increased by **17.8%** to **$6,788,794**, primarily due to structural investments for growth and scale, and increased share-based compensation expense[10](index=10&type=chunk) - Operating loss was **$1,193,037**, compared to operating income of **$137,626** in the prior year period[10](index=10&type=chunk) - Net loss was **$1,295,155** (or **$0.31 per share**), compared to a net loss of **$99,664** (or **$0.02 per share**) in the prior year period[10](index=10&type=chunk) - Adjusted EBITDA was **$104,162**, compared to **$1,371,579** in 2024[10](index=10&type=chunk) [Financial Outlook](index=3&type=section&id=Financial%20Outlook) [2025 Outlook](index=3&type=section&id=2025%20Outlook) The company revised its 2025 guidance, expecting full-year revenue to be below 2024 due to Q1 professional services weakness, but still anticipates SaaS revenue growth and positive Adjusted EBITDA, albeit significantly reduced due to increased sales and marketing investments - Total revenues for **2025** are expected to be below **2024**, primarily due to professional services weakness in the first half of the year[11](index=11&type=chunk) - The company anticipates continued growth in SaaS revenue[11](index=11&type=chunk) - The company expects to maintain positive Adjusted EBITDA[11](index=11&type=chunk) - Adjusted EBITDA for **2025** is projected to be **more than 50% lower** than fiscal **2024**, due to increased investments in sales and marketing aimed at generating returns in late **2025** and beyond[11](index=11&type=chunk) [Company Information](index=3&type=section&id=Company%20Information) [About Intellinetics, Inc.](index=3&type=section&id=About%20Intellinetics%2C%20Inc.) Intellinetics, Inc. is a digital transformation solutions provider offering document and data management, storage, and protection services through its IntelliCloud content management platform for highly regulated markets, alongside business process outsourcing, scanning, and records storage services - Intellinetics, Inc. (NYSE American: INLX) is a digital transformation solutions provider[13](index=13&type=chunk) - Its flagship solution, the IntelliCloud content management platform, offers advanced security, compliance, workflow, and collaboration features[13](index=13&type=chunk) - The company also provides Business Process Outsourcing (BPO), document and microfilm scanning services, and records storage[13](index=13&type=chunk) - Serves highly regulated industries such as healthcare/human services providers, K-12 education, public safety, and state and local government[13](index=13&type=chunk) [Cautionary Statement](index=3&type=section&id=Cautionary%20Statement) This press release contains forward-looking statements regarding future business, growth, financial results, and strategy, which involve various risks and uncertainties such as economic changes, labor challenges, and reduced government funding; investors are cautioned not to place undue reliance on these statements, and the company disclaims any obligation to update or revise them - Statements in this press release regarding future business and growth, increased professional services output, improved gross margins, increased sales and marketing efforts, and future revenues (including the **2025** revenue and EBITDA outlook) are forward-looking statements[14](index=14&type=chunk) - Forward-looking statements involve risks and uncertainties, including changes in economic conditions, tariff uncertainties, challenges in recruiting and maintaining a stable workforce, reduced government funding for public education, ability to execute business plans, and market acceptance risks[15](index=15&type=chunk) - Intellinetics cautions investors not to place undue reliance on the forward-looking statements in this press release[15](index=15&type=chunk) - Intellinetics undertakes no obligation to update or revise any forward-looking statements in this press release[15](index=15&type=chunk) [Non-GAAP Financial Measures](index=5&type=section&id=Non-GAAP%20Financial%20Measures) [Adjusted EBITDA Definition and Reconciliation](index=5&type=section&id=Adjusted%20EBITDA%20Definition%20and%20Reconciliation) Intellinetics uses non-GAAP Adjusted EBITDA as a supplemental performance measure to provide a more comprehensive understanding of business trends, noting it is not GAAP compliant and should not replace net income or operating income, and provides a reconciliation to GAAP net (loss) income - Adjusted EBITDA is a non-GAAP supplemental performance measure used by the company, not compliant with U.S. Generally Accepted Accounting Principles (GAAP)[16](index=16&type=chunk) - It should not be considered a substitute for net income, operating income, or any other GAAP performance measure[17](index=17&type=chunk) - Adjusted EBITDA is defined as earnings before interest expense, income taxes, depreciation and amortization expense, the non-cash portion of share-based compensation, note conversions, and other specific transaction costs[18](index=18&type=chunk) Reconciliation of Net (Loss) Income to Adjusted EBITDA | | For the Three Months Ended June 30, | | For the Six Months Ended June 30, | | :---------------------------------- | :-------------------- | :-------------------- | :-------------------- | | | **2025** | **2024** | **2025** | **2024** | | Net (loss) income - GAAP | $(567,590) | $75,050 | $(1,295,155) | $(99,664) | | Interest expense, net | $59,112 | $97,056 | $102,118 | $237,290 | | Depreciation and amortization | $307,442 | $274,638 | $615,127 | $538,648 | | Share-based compensation | $228,609 | $251,473 | $682,072 | $695,305 | | **Adjusted EBITDA** | **$27,573** | **$698,217** | **$104,162** | **$1,371,579** | [Condensed Consolidated Financial Statements](index=6&type=section&id=Condensed%20Consolidated%20Financial%20Statements) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section presents the unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2025 and 2024, detailing revenues by service category, cost of revenues, gross profit, operating expenses, and net (loss) income Condensed Consolidated Statements of Operations Refer to page 6 of the original report for detailed condensed consolidated statements of operations, including revenues, costs, gross profit, operating expenses, and net (loss) income data for the three and six months ended June 30, 2025, and 2024 [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the unaudited condensed consolidated balance sheets as of June 30, 2025, and December 31, 2024, detailing the company's assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheets Refer to page 7 of the original report for detailed condensed consolidated balance sheets, including assets, liabilities, and stockholders' equity data as of June 30, 2025, and December 31, 2024 [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2025 and 2024, detailing cash flows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Refer to page 8 of the original report for detailed condensed consolidated statements of cash flows, including cash flow data from operating, investing, and financing activities for the six months ended June 30, 2025, and 2024

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 decreased by 5.8% to $4.2 million compared to $4.5 million in the same period last year [11] - SaaS revenue grew by 9.8% to $1.5 million, driven by early successes in payables automation [11] - Professional services revenue decreased by 13.2% to $2.2 million, accounting for 51% of total revenue compared to 55% last year [12] - Consolidated gross margin increased by 322 basis points to 67.6% due to a better revenue mix and improved SaaS margins [12] - Net loss for Q1 was $728,000 compared to a net loss of $175,000 in the same period last year [13] - Adjusted EBITDA for the quarter was $77,000, down from $673,000 in Q1 2024 [14] Business Line Data and Key Metrics Changes - SaaS revenue, including hosting, showed growth while professional services experienced a decline [11][12] - The company closed multiple orders with partners, indicating a strong pipeline for SaaS products [5][9] Market Data and Key Metrics Changes - The company noted a significant order intake week with over $2.4 million in new project contracts, expected to be recognized over the next six to seven months [9] - Recent political events and economic conditions, such as high interest rates in the building industry, have created some uncertainty but are expected to improve [10][25] Company Strategy and Development Direction - The company is focusing on transforming into a predominantly SaaS-driven business with a diverse suite of solutions [6] - Investments in sales and marketing, as well as IT infrastructure, are aimed at accelerating growth and enhancing customer trust [8] - The company plans to continue scaling its business and enhancing development capabilities to bring new features to market more quickly [6][8] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, highlighting a strong competitive position and growth opportunities in the market [35] - The company expects to grow revenues year-over-year for fiscal 2025, particularly in SaaS, while maintaining positive adjusted EBITDA [17] Other Important Information - The company has paused aggressive debt prepayments to focus on sales and marketing initiatives [15] - A shelf registration was filed to strengthen the balance sheet and enable quick capital actions [16] Q&A Session Summary Question: How many implementations will you have and what would those mean in terms of annual recurring revenue? - The company expects to have about 22 to 23 customers using the SaaS product [20] Question: How is the implementation of purchase orders progressing? - The first release of payables order was launched in April, with positive initial feedback [21][22] Question: Are there any customer hesitations regarding implementation timing? - Hesitations are more related to market conditions rather than the company's products [24][25] Question: Are the new orders in professional services stable in terms of margin opportunities? - The company has a strong backlog with over $3 million of work queued, which should help restore historical performance levels [27] Question: Is the company still serving over 600 K-12 customers? - Yes, the company has launched new products in the K-12 market and is seeing positive growth [28][30]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 decreased by 5.8% to $4.2 million compared to $4.5 million in the same period last year [11] - SaaS revenue grew by 9.8% to $1.5 million, driven by early successes in payables automation [11] - Professional services revenue decreased by 13.2% to $2.2 million, accounting for 51% of total revenue compared to 55% last year [12] - Net loss for Q1 was $728,000, compared to a net loss of $175,000 for the same period last year [13] - Adjusted EBITDA for the quarter was $77,000, down from $673,000 in Q1 2024 [14] Business Line Data and Key Metrics Changes - SaaS revenue increased due to payables automation, while professional services revenue declined due to timing issues [11][12] - The gross margin percentage increased to 67.6%, driven by a better revenue mix and improved SaaS margins [12][13] Market Data and Key Metrics Changes - The company experienced a record-breaking week with over $2.4 million in new project contracts, indicating strong demand from state agencies and commercial clients [9] - Recent political events have created uncertainty, but management is optimistic about future demand for their products and services [10] Company Strategy and Development Direction - The company is focusing on transforming into a predominantly SaaS-driven business with a diverse suite of solutions [5] - Investments are being made in sales and marketing, as well as IT infrastructure, to enhance customer trust and cybersecurity [7] - The company plans to continue scaling its business and expects to see returns on these investments in late 2025 and beyond [7][16] Management's Comments on Operating Environment and Future Outlook - Management acknowledges headwinds in the building industry due to high interest rates and tariffs but remains optimistic about future growth [23] - The company expects to grow revenues year-over-year for fiscal 2025, particularly in SaaS revenues, while maintaining positive adjusted EBITDA [16] Other Important Information - The company has temporarily paused aggressive debt prepayments to focus on sales and marketing initiatives [15] - A shelf registration has been filed to strengthen the balance sheet and act quickly on market opportunities [15] Q&A Session Summary Question: How many implementations will you have and what would those mean in terms of annual recurring revenue? - The company will have about 22 to 23 customers using the SaaS product for payables automation [19] Question: How is the implementation of purchase orders progressing? - The first release of payables order was launched in April, with positive initial feedback [20][21] Question: Are there any customer hesitations regarding implementation timing? - Hesitation is more related to market conditions rather than the company's product [23] Question: Are the new orders in professional services stable in terms of margin opportunities? - Yes, the company has a strong backlog with over $3 million of work queued [27] Question: Does the company still serve over 600 K-12 customers? - Yes, the company has launched new products in the K-12 market and is seeing good growth [28][29]

[Financial & Operational Highlights](index=1&type=section&id=Financial%20%26%20Operational%20Highlights) Intellinetics' Q1 2025 revenue fell 5.8% to $4.25 million, leading to increased net loss and reduced Adjusted EBITDA amid strategic investments Q1 2025 vs Q1 2024 Key Financial Metrics | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $4,247,345 | $4,507,084 | -5.8% | | SaaS Revenue | $1,542,169 | $1,405,153 | +9.8% | | Professional Services Revenue | $2,158,315 | $2,485,457 | -13.2% | | Net Loss | ($727,565) | ($174,714) | Increased Loss | | Adjusted EBITDA | $76,589 | $673,362 | -88.6% | - The company is strategically investing in sales, marketing, and IT infrastructure to scale the business and accelerate its transformation into a predominantly SaaS-driven company[4](index=4&type=chunk) - Key operational achievements include the launch of an initial Purchase Order feature set for its Payables Automation partner and a **50% quarterly increase** in live reference accounts for the IntelliCloud Payables Automation solution[4](index=4&type=chunk)[7](index=7&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) CEO DeSocio emphasized strategic investments in sales and marketing to scale SaaS, anticipating professional services rebound and long-term SaaS growth via ERP partnerships - The company is investing to scale its business and transition to a SaaS-driven model, supported by the launch of a new purchase order feature for its key Payables Automation partner[4](index=4&type=chunk) - Recent hires include a Sales Engineer, Senior Solutions Consultant, and a new VP of Sales to develop and direct the growing sales team[4](index=4&type=chunk) - Professional services revenue is expected to rebound, with a significant increase in the order backlog indicating a return to historical scanning levels[5](index=5&type=chunk) - The core long-term strategy is to grow the SaaS business by penetrating the customer bases of strategic ERP partners[6](index=6&type=chunk) [Financial Performance Analysis](index=3&type=section&id=Summary%20%E2%80%93%202025%20First%20Quarter%20Results) Q1 2025 revenues fell 5.8% to $4.25 million, driven by professional services decline, while operating expenses rose 21.1% from investments, leading to a wider net loss Q1 2025 vs Q1 2024 Revenue Performance | Revenue Stream | Q1 2025 | Q1 2024 | YoY Change | | :--- | :--- | :--- | :--- | | SaaS Revenue | $1,542,169 | $1,405,153 | +9.8% | | Professional Services | $2,158,315 | $2,485,457 | -13.2% | | **Total Revenues** | **$4,247,345** | **$4,507,084** | **-5.8%** | - Total operating expenses increased **21.1%** to **$3.55 million**, driven by initiatives in sales, marketing, and enhancements to the IT and control environment (SOC2)[9](index=9&type=chunk) Q1 2025 vs Q1 2024 Profitability | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Loss from Operations | ($684,559) | ($34,480) | | Net Loss | ($727,565) | ($174,714) | | Net Loss Per Share | ($0.17) | ($0.04) | [2025 Outlook](index=3&type=section&id=2025%20Outlook) Management expects FY2025 revenue growth, primarily from SaaS, with positive Adjusted EBITDA, though reduced by over half due to heavy sales and marketing investments - The company expects to grow revenues on a year-over-year basis for fiscal year 2025, with a particular focus on growing SaaS revenues[11](index=11&type=chunk) - Adjusted EBITDA is expected to remain positive for 2025 but will be reduced by **more than half** compared to fiscal 2024 due to increased investments in sales and marketing[11](index=11&type=chunk) [Non-GAAP Financial Measures](index=5&type=section&id=Non-GAAP%20Financial%20Measures) Adjusted EBITDA, a non-GAAP measure, is used to compare core operating performance, calculated by adjusting net income for interest, taxes, depreciation, amortization, and share-based compensation Reconciliation of Net Loss to Adjusted EBITDA | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net (loss) income - GAAP | $(727,565) | $(174,714) | | Interest expense, net | $43,006 | $140,234 | | Depreciation and amortization | $307,685 | $264,010 | | Share-based compensation | $453,463 | $443,832 | | **Adjusted EBITDA** | **$76,589** | **$673,362** | - Adjusted EBITDA is defined as earnings before interest expense, income taxes, depreciation and amortization, share-based compensation, and other specific transaction-related costs[18](index=18&type=chunk) [Condensed Consolidated Financial Statements](index=6&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents unaudited condensed consolidated financial statements for Q1 2025, including the Statement of Operations, Balance Sheet, and Statement of Cash Flows [Statement of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2025 total revenues were $4.25 million, with gross profit flat, but a 50% rise in sales and marketing costs led to a $684,559 operating loss and a $727,565 net loss Condensed Consolidated Statement of Operations (unaudited) | For the Three Months Ended March 31, | 2025 | 2024 | | :--- | :--- | :--- | | Total revenues | $4,247,345 | $4,507,084 | | Gross profit | $2,869,200 | $2,899,644 | | Total operating expenses | $3,553,759 | $2,934,124 | | Loss from operations | $(684,559) | $(34,480) | | Net loss | $(727,565) | $(174,714) | | Basic and Diluted net loss per share | $(0.17) | $(0.04) | [Balance Sheet](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets were $17.96 million, cash $2.14 million, total liabilities $7.61 million, and total stockholders' equity $10.36 million Key Balance Sheet Items | As of | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash | $2,138,243 | $2,489,236 | | Total current assets | $5,124,278 | $5,474,556 | | Total assets | $17,964,014 | $18,574,956 | | Total current liabilities | $6,458,701 | $6,597,773 | | Total liabilities | $7,606,373 | $7,943,201 | | Total stockholders' equity | $10,357,641 | $10,631,755 | [Statement of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2025 experienced a net cash outflow from operating activities of $110,353, a shift from prior year's inflow due to higher net loss, decreasing cash by $350,993 Key Cash Flow Items | For the Three Months Ended March 31, | 2025 | 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(110,353) | $611,766 | | Net cash used in investing activities | $(223,934) | $(127,932) | | Net cash used in financing activities | $(16,706) | $(514,138) | | **Net decrease in cash** | **$(350,993)** | **$(30,304)** | | **Cash - end of period** | **$2,138,243** | **$1,184,944** |

Revenue Performance - Total revenues for Q1 2025 were $4,247,345, a decrease of 5.8% year over year from $4,507,084 in Q1 2024[92] - SaaS revenue increased to $1,542,169, reflecting a growth of 9.8% year over year[92] - Professional services revenue decreased by 13.2% to $2,158,315, primarily due to reduced project work[96] - Document Management segment revenue was $1,961,312, while Document Conversion segment revenue was $2,286,033[93] Profitability Metrics - Gross profit percentage improved to 67.6%, up from 64.3% in Q1 2024[92] - Total gross profit for Q1 2025 was $2,869,200, a slight decrease from $2,899,644 in Q1 2024, with a gross profit percentage increase to 67.6% from 64.3%[100][1] - Gross profit from Software as a Service (SaaS) increased to $1,327,040 in Q1 2025, up from $1,189,161 in Q1 2024, with a gross margin of 86.1% compared to 84.6%[1][101] - Cost of Professional Services decreased by $249,122, or 19.3%, in Q1 2025, leading to an increase in gross margin to 51.8% from 48.1% in Q1 2024[102] Operating Expenses - Operating expenses rose by 21.1% to $3,553,759, driven by increased sales and marketing initiatives[92] - Operating expenses rose to $3,553,759 in Q1 2025, up from $2,934,124 in Q1 2024, with General and Administrative expenses increasing by 14.3%[103][104] - Sales and marketing expenses surged by $272,419, or 50.3%, in Q1 2025, driven by the expansion of the sales team[105] Losses and Financial Position - Loss from operations was $684,559, compared to a loss of $34,480 in Q1 2024[92] - Net loss for Q1 2025 was $727,565, with a net loss per share of $0.17, compared to a net loss of $174,714 and $0.04 per share in Q1 2024[92] - Cash and cash equivalents stood at $2.1 million as of March 31, 2025, with a working capital deficit of $1.3 million[110] - Net cash used in operating activities was $110,353 in Q1 2025, compared to net cash provided of $611,766 in Q1 2024[115] Capital Expenditures and Financing - Capital expenditures totaled $223,934, including $102,854 in capitalized software costs, compared to $127,932 in Q1 2024[92] - Interest expense decreased by $97,228, or 69.3%, to $43,006 in Q1 2025, due to early principal repayments of the 2022 Notes[107] - The company plans to seek additional debt or equity financing on acceptable terms to meet future capital needs[112] Customer Contracts - The company secured a renewal contract with its largest customer effective from October 1, 2023, with an estimated net rate increase of approximately 21%[109]

Company Overview - Intellinetics, Inc. (INLX) shares increased by 11% to close at $14.47, with notable trading volume compared to typical sessions, contrasting with a 1.4% loss over the past four weeks [1] - The company is experiencing strong growth in its Payables Automation Solution and is expanding into new markets such as K-12, while also investing in sales and marketing for future revenue growth [1] Financial Performance - Intellinetics is expected to report a quarterly loss of $0.07 per share, reflecting a year-over-year decline of 75%, with revenues projected at $4.6 million, a 2% increase from the previous year [2] - The consensus EPS estimate for Intellinetics has remained unchanged over the last 30 days, indicating that stock price movements may not sustain without trends in earnings estimate revisions [3] Industry Context - Intellinetics operates within the Zacks Internet - Content industry, where Perion Network (PERI) is another player, having closed at $9.22 with a 0.1% decrease in the last trading session and a 30.4% return over the past month [3] - Perion Network's consensus EPS estimate has also remained unchanged at $0.09, representing a 79.6% decline from the previous year, and it holds a Zacks Rank of 3 (Hold) [4]