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