Intellinetics, Inc. Reports First Quarter Results
Revenue Growth and Channel Expansion
COLUMBUS, OH – (May 15, 2017) – Intellinetics, Inc. (OTCQB: INLX), a cloud-based document solutions provider, announced financial results for the three months ended March 31, 2017.
Q1 Key Metrics
| ● | Software as a Service Revenue increased 20% | |
| ● | Total Revenue increased 18% | |
| ● | Slight Net Loss improvement and Adjusted EBITDA erosion – a result of sales and marketing investments to support and execute our channel expansion |
Summary – Q1 Results
Revenues for the three months ended March 31, 2017 were $710,394, as compared with $603,391 for the same period in 2016, an increase of $107,003, or 18%. Sales of Software as a Service (SaaS) growth was 20%, with new customers partially offset by a price reduction for a key channel partner. Overall, gross margins were 71% for each of the three months ended March 31, 2017 and 2016.
Net loss was $(448,709) and $(535,765) for the three months ended March 31, 2017 and 2016, or $(0.03) and $(0.03) per share, respectively, representing a decrease of $87,056, or 16%. Total decrease in net loss was attributable to the increase in gross profit for the three months ended March 31, 2017. Adjusted EBITDA loss for the three months was $(173,566), compared with a loss of $(112,875) for last year, a 54% increase.
Matthew L. Chretien, President and CEO of Intellinetics, stated, “In Q1 we took another step forward in revenue growth while taking major steps to advance relationships with several strategic partners across multiple sales channels. We expect that these relationships will soon reflect the successful execution of our business plan as these new channels generate revenue beginning in Q2 and beyond.”
First Quarter Highlights
| ● | In January, our convertible debt financing round of $1.25M to support our expected rapid growth was fully subscribed. | |
| ● | Continued to grow total revenues quarter-over-quarter sequentially from Q1 2016. | |
| ● | Accelerated our relationship with technology-based partner Field2Base, announced earlier this month, and integrated our technology with their mobile solution. The partnership is expected to begin generating revenue in Q2 2017. | |
| ● | We focused on growing new revenue streams through additional 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 product vs. as a separate / standalone process. In some cases, this created new offerings that we are also selling through our imaging channel. |
| ● | Further developed our strategic partnerships with document solutions distribution, setting the stage for revenue generation beginning in Q2. |
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. Its flagship IntelliCloudTM platform is ideal for embedded work teams in businesses of any size stuck in document-centric processes that are not optimized. IntelliCloud offers a painless way to merge those documents into digital workflows, increasing service levels, compliance and customer satisfaction while decreasing costs and risk. Intellinetics collaborated with Intel® to create its IntelliCloud Channel Program that enables resellers to easily embed IntelliCloud into 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 and new revenues associated with any channel partner, distribution partner, or other reseller; Intellinetics’ future revenues and growth in Q2 2017 and beyond; market penetration; execution of our business plan; 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 Intellinetics’ channel partners and distribution partners, technical development risks, and other risks and uncertainties discussed in Intellinetics’ most recent annual report on Form 10-K and subsequently filed Form 10-Qs and Form 8-Ks. 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 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
Non-GAAP Financial Measure
Intellinetics uses non-GAAP Adjusted EBITDA as a supplemental measure of our performance that is 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, any income taxes, depreciation and amortization expense, and other non-cash expenses such as share-based compensation, note conversion warrant expense and other financing related transaction costs.
Reconciliation of Net Loss to Adjusted EBITDA
| Three Months Ended March 31, | ||||||||
| 2017 | 2016 | |||||||
| Net Loss - GAAP | $ | (448,709 | ) | $ | (535,765 | ) | ||
| Interest expense, net | 132,803 | 138,668 | ||||||
| Depreciation and Amortization | 3,006 | 2,956 | ||||||
| Share-based compensation | 86,383 | 129,693 | ||||||
| Note conversion/issuance warrant expense | 52,951 | 137,970 | ||||||
| Note conversion underwriting expense | - | 13,603 | ||||||
| Adjusted EBITDA | $ | (173,566 | ) | $ | (112,875 | ) | ||
Continued
INTELLINETICS, INC. and SUBSIDIARY
Condensed Consolidated Statements of Operations
(Unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2017 | 2016 | |||||||
| Revenues: | ||||||||
| Sale of software | $ | 162,984 | $ | 90,874 | ||||
| Software as a Service | 132,308 | 110,156 | ||||||
| Software maintenance services | 249,922 | 246,596 | ||||||
| Professional services | 107,604 | 98,176 | ||||||
| Third Party services | 57,576 | 57,589 | ||||||
| Total revenues | 710,394 | 603,391 | ||||||
| Cost of revenues: | ||||||||
| Sale of software | 23,704 | 19,518 | ||||||
| Software as a Service | 94,357 | 48,884 | ||||||
| Software maintenance services | 26,078 | 46,558 | ||||||
| Professional services | 49,653 | 31,355 | ||||||
| Third party services | 13,088 | 27,442 | ||||||
| Total cost of revenues | 206,880 | 173,757 | ||||||
| Gross profit | 503,514 | 429,634 | ||||||
| Operating expenses: | ||||||||
| General and administrative | 579,837 | 636,267 | ||||||
| Sales and marketing | 236,577 | 187,508 | ||||||
| Depreciation | 3,006 | 2,956 | ||||||
| Total operating expenses | 819,420 | 826,731 | ||||||
| Loss from operations | (315,906 | ) | (397,097 | ) | ||||
| Other income (expense) | ||||||||
| Interest expense, net | (132,803 | ) | (138,668 | ) | ||||
| Total other income (expense) | (132,803 | ) | (138,668 | ) | ||||
| Net loss | $ | (448,709 | ) | $ | (535,765 | ) | ||
| Basic and diluted net loss per share: | $ | (0.03 | ) | $ | (0.03 | ) | ||
| Weighted average number of common shares outstanding - basic and diluted | 17,354,619 | 16,262,800 | ||||||
INTELLINETICS, INC. and SUBSIDIARY
Condensed Consolidated Balance Sheets
| March 31, 2017 | December 31, 2016 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 494,935 | $ | 689,946 | ||||
| Accounts receivable, net | 366,530 | 259,497 | ||||||
| Prepaid expenses and other current assets | 211,954 | 150,620 | ||||||
| Total current assets | 1,073,419 | 1,100,063 | ||||||
| Property and equipment, net | 22,206 | 18,783 | ||||||
| Other assets | 10,284 | 10,285 | ||||||
| Total assets | $ | 1,105,909 | $ | 1,129,131 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 736,415 | $ | 767,197 | ||||
| Deferred revenues | 538,985 | 665,460 | ||||||
| Deferred compensation | 215,012 | 215,012 | ||||||
| Notes payable - current | 366,316 | 360,496 | ||||||
| Notes payable - related party - current | 39,273 | 38,307 | ||||||
| Total current liabilities | 1,896,001 | 2,046,472 | ||||||
| Long-term liabilities: | ||||||||
| Notes payable - net of current portion | 759,166 | 585,782 | ||||||
| Notes payable - related party - net of current portion | 309,841 | 299,447 | ||||||
| Deferred interest expense | 156,901 | 158,062 | ||||||
| Other long-term liabilities - related parties | 6,609 | 1,125 | ||||||
| Total long-term liabilities | 1,232,517 | 1,044,416 | ||||||
| Total liabilities | 3,128,518 | 3,090,888 | ||||||
| Stockholders’ deficit: | ||||||||
| Common stock, $0.001 par value, 50,000,000 shares authorized; 17,376,012 and 16,815,850 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively | 30,380 | 26,816 | ||||||
| Additional paid-in capital | 13,350,470 | 12,966,177 | ||||||
| Accumulated deficit | (15,403,459 | ) | (14,954,750 | ) | ||||
| Total stockholders’ deficit | (2,022,609 | ) | (1,961,757 | ) | ||||
| Total liabilities and stockholders’ deficit | $ | 1,105,909 | $ | 1,129,131 | ||||
INTELLINETICS, INC. and SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
| For the Three Months Ended March 31, | ||||||||
| 2017 | 2016 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (448,709 | ) | $ | (535,765 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 3,006 | 2,956 | ||||||
| Bad debt expense | 2,976 | - | ||||||
| Amortization of deferred financing costs | 19,699 | 708 | ||||||
| Amortization of beneficial conversion option | 59,908 | - | ||||||
| Stock issued for services | 57,500 | 62,500 | ||||||
| Stock options compensation | 28,883 | 67,193 | ||||||
| Note conversion warrant expense | - | 137,970 | ||||||
| Note offer warrant expense | 52,951 | - | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (110,009 | ) | (54,295 | ) | ||||
| Prepaid expenses and other current assets | (61,333 | ) | (29,579 | ) | ||||
| Accounts payable and accrued expenses | (30,782 | ) | (68,489 | ) | ||||
| Other long-term liabilities - related parties | 5,484 | (12,852 | ) | |||||
| Deferred interest expense | (1,161 | ) | 8,198 | |||||
| Deferred revenues | (126,475 | ) | (127,506 | ) | ||||
| Total adjustments | (99,353 | (13,196 | ) | |||||
| Net cash used in operating activities | (548,062 | ) | (548,961 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | (6,429 | ) | - | |||||
| Net cash used in investing activities | (6,429 | ) | - | |||||
| Cash flows from financing activities: | ||||||||
| Sale of Common Stock | - | 559,285 | ||||||
| Exercise of stock options | - | 3,500 | ||||||
| Payment of deferred financing costs | (103,326 | ) | - | |||||
| Proceeds from notes payable | 560,000 | - | ||||||
| Repayment of notes payable | (87,971 | ) | (60,000 | ) | ||||
| Repayment of notes payable - related parties | (9,223 | ) | (66,501 | ) | ||||
| Net cash provided by financing activities | 359,480 | 436,284 | ||||||
| Net increase (decrease) in cash | (195,011 | ) | (112,677 | ) | ||||
| Cash - beginning of period | 689,946 | 1,117,118 | ||||||
| Cash - end of period | $ | 494,935 | $ | 1,004,441 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid during the period for interest and taxes | $ | 36,956 | $ | 20,294 | ||||
| Supplemental disclosure of non-cash financing activities: | ||||||||
| Accrued interest notes payable converted to equity | $ | - | $ | 35,038 | ||||
| Discount on notes payable for beneficial conversion feature | 248,522 | - | ||||||
| Notes payable conversion warrant expense | - | 113,762 | ||||||
| Notes payable conversion underwriting warrant expense | - | 24,207 | ||||||
| Notes payable converted to equity | - | 135,000 | ||||||