Intellinetics, Inc. Reports Year-End Results

SaaS Revenue Increased 86%

 

COLUMBUS, OH – (March 30, 2017) – Intellinetics, Inc. (OTCQB: INLX), a document solutions software company focused on IntelliCloudTM (a cloud-based document management solution for the Small to Medium Business (SMB) market and business teams within large enterprises), announced financial results for the twelve months ended December 31, 2016.

 

Year End Key Metrics

 

  Software as a Service Revenue increased 86%
  Total Revenue increased 11%
  Despite net loss improvement, Adjusted EBITDA erosion – a result of sales and marketing investments needed to support and execute our burgeoning pipeline

 

Summary – Year-End Results

 

Revenues for the twelve months ended December 31, 2016 were $2,601,733, as compared with $2,336,991 for the same period in 2015, an increase of $264,742, or 11%. Sales of Software as a Service (SaaS) led the way with an 86% increase, which includes data storage and hosting services. Overall, gross margins were 73% and 77% for the twelve months ended December 31, 2016 and 2015, respectively, primarily due to product mix.

 

Net loss was $(1,576,311) and $(3,921,428) for the years ended December 31, 2016 and 2015, or $(0.09) and $(0.55) per share, respectively, representing a decrease of $(2,345,117), or 60%. Total decrease in net loss was attributable to the decrease in non-cash and mostly non-recurring expenses, including stock option expense, non-cash interest expense and notes payable conversion underwriting expense associated with the conversion of convertible notes to equity, effected in December 2015, as well as an increase in gross profit for the year ended December 31, 2016. However, Adjusted EBITDA loss for the year ended December 31, 2016 was $(1,023,668), compared with a loss of $(481,454) for the year ended December 31, 2015, a 113% increase.

 

Matthew L. Chretien, President and CEO of Intellinetics, stated, “We made tremendous progress in 2016 and many of the building blocks to create accelerating growth were put in place. We look forward to our quarterly financial results soon reflecting successful execution of our business plan. In the meantime, we look forward to providing progress reports on a growing number of OEM/Embedded channel technology partners.”

 

2016 Highlights

 

    Refined our imaging channel model by streamlining growth through a master distribution partner (such as copier resellers) using IntelliCloud to become a world-class managed business services provider.

 

  The partner is initially focusing on its top 150 dealers in its top 30 markets - supported by a mature multi-channel marketing engine and in-field sales teams.

 

  Designed, built and launched IntelliCloud University™, allowing dealers (that primarily sell Multi-Function Printers, Managed Print Services or Managed IT Services) to generate more sales by seamlessly adding IntelliCloud document management to their core offerings, while reducing our costs. (www.intelliclouduniversity.com)

 

  Continued to grow total revenues quarter-over-quarter all year while focusing on SaaS business.

 

  SaaS sales are a recurring revenue model - providing an increasingly growing, stable revenue base while maximizing long-term enterprise value.

 

  Launched in Q4, we focused on growing new revenue streams through technology-based partners that have leading cloud-based platforms with large and growing installation bases.

 

   
 

 

  This new OEM / Embedded channel segment embeds the sale of IntelliCloud into an existing model vs. as a separate / standalone process. In some cases, this created new offerings that we are also selling through our imaging channel.

 

  At the end of December, we initiated a convertible debt financing round of $1.25M (which was fully subscribed in January) to support our expected rapid growth.

 

IntelliCloudTM – Powered by the Intel® NUC

 

IntelliCloud™ is a cloud-based document management platform that is optimized for the vast SMB market segment and business teams within large enterprises who are stuck with paper in business-critical processes. Thousands and thousands of people at any given moment depend upon IntelliCloud to perform their work. IntelliCloud, which is strategically packaged with Intel® technology, provides Law Enforcement Grade security and compliance tools and is supported by a growing network of market-leading reseller partners. Resellers often attach IntelliCloud to the software, hardware, and/or services they already sell without the sales or technical complexity of other less effective options in the market.

 

About Intellinetics, Inc.

 

Intellinetics, Inc. is a Columbus, Ohio-based ECM software company. Intellinetics partnered with Intel to create the IntelliCloud Channel Program that makes it easy to add turnkey document workflow solutions to the copiers, productivity software and services they already provide. IntelliCloud provides dealers a “deploy once, use many” innovation where one IntelliCloud customer sale/activation creates endless possibilities to add other software applications that deliver more value and increase revenue. 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 associated with any channel partner, distribution partner, or other reseller; Intellinetics’ future revenues and growth, whether SaaS-based or otherwise; market penetration; 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 associated with the effect of changing economic conditions, trends in the products markets, variations in the company’s cash flow or adequacy of capital resources, market acceptance risks, the success of our channel partners and distribution partners, technical development risks, and other risks and uncertainties discussed in the annual report on Form 10-K, to be filed on the date of this release, and any previously filed Form 10-Qs and Form 8-Ks. The company 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 and its Affiliates on its website or at www.intellinetics.com or at www.sec.gov.

 

CONTACT:

 

Terri MacInnis, VP of Investor Relations

Bibicoff + MacInnis, Inc.

818.379.8500 terri@bibimac.com

 

Continued

 

   
 

 

Non-GAAP Financial Measure

 

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 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 loss, 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, income taxes, depreciation and amortization expense, and other non-cash expenses such as share-based compensation, note conversion warrant/offer expense and other financing related transaction costs.

 

Reconciliation of Net Loss to Adjusted EBITDA        
   Year Ended December 31, 
    2016    2015 
Net loss - GAAP  $(1,576,311)  $(3,921,428)
Interest expense, net   92,570    718,008 
Depreciation and amortization   10,687    11,626 
Share-based compensation   200,378    430,000 
Note conversion/offer warrant expense   235,405    2,083,328 
Note conversion/offer underwriting expense   13,603    197,012 
Adjusted EBITDA  $(1,023,668)  $(481,454)

 

   
 

 

INTELLINETICS, INC. and SUBSIDIARY

Consolidated Statements of Operations

 

   For the Year Ended December 31, 
   2016   2015 
         
Revenues:          
Sale of software  $390,583   $601,141 
Software as a service   525,282    281,899 
Software maintenance services   988,690    941,531 
Professional services   502,952    382,717 
Third Party services   194,226    129,703 
           
Total revenues   2,601,733    2,336,991 
           
Cost of revenues:          
Sale of software   73,566    125,108 
Software as a service   247,928    121,466 
Software maintenance services   127,805    128,597 
Professional services   135,486    100,768 
Third Party services   125,024    72,078 
           
Total cost of revenues   709,809    548,017 
           
Gross profit   1,891,924    1,788,974 
           
Operating expenses:          
General and administrative   2,118,924    2,541,867 
Sales and marketing   1,132,292    791,291 
Depreciation   10,687    11,626 
           
Total operating expenses   3,261,903    3,410,560 
           
Loss from operations   (1,369,979)   (1,555,810)
           
Other income (expense)          
Interest expense, net   (206,332)   (2,365,618)
           
Total other income (expense)   (206,332)   (2,365,618)
           
Net loss  $(1,576,311)  $(3,921,428)
           
Basic and diluted net loss per share:  $(0.09)  $(0.55)
           
Weighted average number of common shares outstanding - basic and diluted   16,650,085    7,152,276 

 

   
 

 

INTELLINETICS, INC. and SUBSIDIARY

Consolidated Balance Sheets

 

   December 31, 2016   December 31, 2015 
ASSETS          
Current assets:          
Cash  $689,946   $1,117,118 
Accounts receivable, net   259,497    217,028 
Prepaid expenses and other current assets   150,620    46,521 
           
Total current assets   1,100,063    1,380,667 
           
Property and equipment, net   18,783    22,603 
Other assets   10,285    10,285 
           
Total assets  $1,129,131   $1,413,555 
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
           
Current liabilities:          
Accounts payable and accrued expenses  $767,197   $826,864 
Deferred revenues   665,460    638,193 
Deferred compensation   215,012    215,012 
Notes payable - current   360,496    401,573 
Notes payable - related party - current   38,307    92,805 
Total current liabilities  $2,046,472   $2,174,447 
           
Long-term liabilities:          
Notes payable - net of current portion   585,782    782,206 
Notes payable - related party - net of current portion   299,447    127,409 
Deferred interest expense   158,062    136,078 
Other long-term liabilities - related parties   1,125    12,852 
           
Total long-term liabilities   1,044,416    1,058,545 
           
Total liabilities   3,090,888    3,232,992 
           
Stockholders’ deficit:          
Common stock, $0.001 par value, 50,000,000 shares authorized; 16,815,850 and 14,908,439 shares issued and outstanding at December 31, 2016 and 2015, respectively   26,816    21,909 
Additional paid-in capital   12,966,177    11,537,093 
Accumulated deficit   (14,954,750)   (13,378,439)
Total stockholders’ deficit   (1,961,757)   (1,819,437)
Total liabilities and stockholders’ deficit  $1,129,131   $1,413,555 

 

   
 

 

INTELLINETICS, INC. and SUBSIDIARY

Consolidated Statements of Cash Flows

 

   For the Twelve Months Ended December 31, 
   2016   2015 
Cash flows from operating activities:          
Net loss  $(1,576,311)  $(3,921,428)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   10,687    11,626 
Bad debt expense   23,244    26,771 
Amortization of deferred financing costs   2,832    13,269 
Amortization of beneficial conversion option   -    195,591 
Stock issued for services   62,500    - 
Stock options compensation   137,878    430,000 
Note conversion warrant expense   137,970    2,083,328 
Note offer warrant expense   97,435    - 
Changes in operating assets and liabilities:          
Accounts receivable   (65,713)   (144,738)
Prepaid expenses and other current assets   (104,099)   (853)
Accounts payable and accrued expenses   (24,628)   256,104 
Other long-term liabilities - related parties   (11,727)   323,315 
Deferred interest expense   21,984    32,837 
Deferred revenues   27,267    74,195 
Total adjustments   315,630    3,301,445 
Net cash used in operating activities   (1,260,681)   (619,983)
           
Cash flows from investing activities:          
Purchases of property and equipment   (6,867)   (5,558)
Net cash used in investing activities   (6,867)   (5,558)
           
Cash flows from financing activities:          
Sale of Common Stock   559,285    1,209,633 
Exercise of stock options   3,499    - 
Payment of deferred financing costs   (53,029)   - 
Proceeds from notes payable   315,000    - 
Proceeds from notes payable - related parties   375,000    582,000 
Repayment of notes payable   (266,573)   (204,401)
Repayment of notes payable - related parties   (92,806)   (28,654)
Net cash provided by financing activities   840,376    1,558,578 
           
Net increase (decrease) in cash   (427,172)   933,037 
Cash - beginning of period   1,117,118    184,081 
Cash - end of period  $689,946   $1,117,118 
           
Supplemental disclosure of cash flow information:          
Cash paid during the period for interest and taxes  $56,702   $47,633 
           
Supplemental disclosure of non-cash financing activities:          
Accrued interest notes payable converted to equity  $35,039   $62,294 
Accrued interest notes payable related parties converted to equity   -    366,484 
Discount on notes payable for beneficial conversion feature   121,154    170,091 
Discount on notes payable - related parties for beneficial conversion feature   144,231    - 
Notes payable conversion warrant expense   113,762    1,647,610 
Notes payable conversion underwriting warrant expense   24,208    435,718 
Notes payable converted to equity   135,000    225,800 
Notes payable related parties converted to equity   -    1,808,068