Intellinetics(INLX) - 2025 Q2 - Quarterly Results

Executive Summary 2025 Second Quarter Highlights 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] - Professional services revenue decreased by 29.0% year-over-year[5] - Total revenues decreased by 13.6% year-over-year[5] - 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] - Adjusted EBITDA was $27,573, down from $698,217 in Q2 2024[5] - All outstanding notes were repaid early in June[5] - Cash balance at quarter-end was approximately $2.1 million[5] CEO Commentary & Strategic Focus 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] - Q3 production is returning to historical levels, with existing orders extending through Q1 2026[4] - Renewed contracts include price increases, expected to drive incremental gross margins in the second half of the year[4] - Company focuses on SaaS revenue growth, which increased by 12.6% year-over-year, with increased staffing to drive further growth[5][6] - Payables Automation solution is anticipated to be a key driver for SaaS growth[6] - All outstanding debt was repaid early in June, improving future cash flow and flexibility[5] Financial Performance Overview Summary – 2025 Second Quarter Results 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] - Professional services revenue decreased by 29.0%, offsetting a 12.6% increase in SaaS revenue[7] - Total operating expenses increased by 14.3% to $3,235,035, driven by sales and marketing investments and IT/control environment enhancements[8] - Operating loss was $508,478, compared to operating income of $172,106 in the prior year period[9] - 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] - Adjusted EBITDA was $27,573, compared to $698,217 in Q2 2024[9] Summary – 2025 Year-to-Date Results 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] - Professional services revenue decreased by 21.4%, offsetting an 11.2% increase in SaaS revenue[10] - 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] - Operating loss was $1,193,037, compared to operating income of $137,626 in the prior year period[10] - 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] - Adjusted EBITDA was $104,162, compared to $1,371,579 in 2024[10] Financial Outlook 2025 Outlook 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] - The company anticipates continued growth in SaaS revenue[11] - The company expects to maintain positive Adjusted EBITDA[11] - 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] Company Information About Intellinetics, Inc. 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] - Its flagship solution, the IntelliCloud content management platform, offers advanced security, compliance, workflow, and collaboration features[13] - The company also provides Business Process Outsourcing (BPO), document and microfilm scanning services, and records storage[13] - Serves highly regulated industries such as healthcare/human services providers, K-12 education, public safety, and state and local government[13] Cautionary Statement 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] - 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] - Intellinetics cautions investors not to place undue reliance on the forward-looking statements in this press release[15] - Intellinetics undertakes no obligation to update or revise any forward-looking statements in this press release[15] Non-GAAP Financial Measures Adjusted EBITDA Definition and Reconciliation 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] - It should not be considered a substitute for net income, operating income, or any other GAAP performance measure[17] - 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] 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 Condensed Consolidated Statements of Operations 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 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 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