Updated - Intellinetics, Inc. Reports Third Quarter and Nine-Month Results

11/10/17 02:18 PM EST

Shows Consistent Software as a Service Growth

COLUMBUS, Ohio, Nov. 10, 2017 (GLOBE NEWSWIRE) -- Intellinetics, Inc. (OTCQB:INLX), a cloud-based document solutions provider, announced financial results for the third quarter and nine months ended September 30, 2017.

2017 Q3 Financial Highlights

  • Total Revenue essentially flat, decreasing less than 1% from the third quarter of 2016.
  • Software as a Service Revenue increased 31% from Q3 2016.
  • Net Loss increase of $39,923 from Q3 2016.
      •  2017 Q3 includes $83,853 of non-cash interest charges.
  • Adjusted EBITDA Loss of $116,036, an improvement of 42% from Q3 2016.

2017 Q3 Results

Revenues for the three months ended September 30, 2017 were $674,240, as compared with $679,445 for the same period in 2016, representing a decrease of $5,205, or 1%. Sales of Software as a Service (SaaS) growth was 31%, representing steady new customer growth. Overall, gross margins were 73% and 76% for the three months ended September 30, 2017 and 2016, respectively.

Net loss was $(286,690) and $(246,767) for the three months ended September 30, 2017 and 2016, or $(0.02) and $(0.01) per share, respectively, representing an increase of $39,923, or 16%. Total increase in net loss was attributable to the increase in interest expense for the three months ended September 30, 2017. Adjusted EBITDA loss for the quarter was $(116,036), compared with a loss of $(199,008) for the same period last year, representing a 42% improvement.

2017 Nine-Month Results

Revenues for the nine months ended September 30, 2017 were $2,121,987 as compared with $1,919,585 for the same period in 2016. Intellinetics reported a net loss of $(1,034,681) and $(1,184,497) for the nine months ended September 30, 2017 and 2016, respectively, representing a decrease (improvement) of $149,816. Net loss per share for the nine months ended September 30, 2017 and 2016 was ($0.06) and ($0.07), respectively.

James F. DeSocio, President & CEO of Intellinetics, stated, “I am excited to be part of this company. I came aboard because I expect to be able to successfully drive sales growth. We plan to build on our strong customer base and partner networks and at the same time invest in direct go to market capabilities. We have refocused our strategy around a core group of customers in the Human Services Provider space where we have a unique and differentiated product value proposition, including auditing, compliance and reporting. We have reallocated resources in all areas of the company to support the new strategy, including Professional Services, Development, and Sales while at the same time investing in ‘go to market’ tools to assist us in demand and lead generation, which will allow us to better control our own destiny.”

“We are disappointed that the Company just fell short of extending its streak of six consecutive quarters of top-line growth. However, we are encouraged by the continued growth in our SaaS revenues. As we continue to focus on increasing our SaaS-based revenues we recognize that short term revenue recognition on subscription services is generally lower than upfront premise license sales. We believe this investment and focus will bear greater revenue consistency in the future, higher growth and will deliver long-term value to shareholders,” DeSocio concluded.

Third Quarter Highlights

  • Hired lead generation expert to assist in creating and driving new outbound mailing campaigns.
  • Built new content, white papers, case studies, fact sheets.
  • Generated first two outbound email campaign series to our primary target industries.
  • Educated partner channel with new strategy, and supported “through partner” marketing efforts.

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 content services 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 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 industry, channel partner, reseller, or other relationship; Intellinetics’ future revenues and growth in Q4 2017 and beyond; market penetration; execution of Intellinetics’ 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 Intellinetics’ 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 at www.intellinetics.com or at www.sec.gov.

CONTACT:
Joe Spain, CFO
Intellinetics, Inc.
614.921.8170 investors@intellinetics.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      
       
    For the Three Months Ended
September 30,
 
    2017     2016  
Net loss - GAAP   $ (286,690 )   $ (246,767 )
Interest expense, net   $ 141,483     $ 22,084  
Depreciation and amortization   $ 3,230     $ 2,437  
Share-based compensation   $ 24,877     $ 23,238  
Note issue warrant expense   $ 1,064       -  
Adjusted EBITDA   $ (116,036 )   $ (199,008 )
                 


INTELLINETICS, INC. and SUBSIDIARY
Condensed Consolidated Statements of Operations
(Unaudited)
             
    For the Three Months Ended
September 30,
    For the Nine Months Ended
September 30,
 
    2017     2016     2017     2016  
                         
Revenues:                                
Sale of software   $ 134,732     $ 96,869     $ 375,007     $ 289,437  
Software as a service     180,517       137,343       461,734       363,842  
Software maintenance services     241,358       256,441       732,160       748,354  
Professional services     81,751       153,895       436,977       337,680  
Third Party services     35,882       34,897       116,109       180,272  
                                 
Total revenues     674,240       679,445       2,121,987       1,919,585  
                                 
Cost of revenues:                                
Sale of software     32,714       16,432       71,515       54,001  
Software as a service     78,915       66,180       228,154       176,416  
Software maintenance services     30,432       25,019       87,463       109,564  
Professional services     36,688       32,476       183,133       94,443  
Third Party services     5,209       26,103       33,707       108,918  
                                 
Total cost of revenues     183,958       166,210       603,972       543,342  
                                 
Gross profit     490,282       513,235       1,518,015       1,376,243  
                                 
Operating expenses:                                
General and administrative     490,943       396,638       1,571,184       1,525,294  
Sales and marketing     141,315       338,843       560,735       842,421  
Depreciation     3,231       2,437       9,016       8,160  
                                 
Total operating expenses     635,489       737,918       2,140,935       2,375,875  
                                 
Loss from operations     (145,207 )     (224,683 )     (622,920 )     (999,632 )
                                 
Other income (expense)                                
Interest expense, net     (141,483 )     (22,084 )     (411,761 )     (184,865 )
                                 
Total other income (expense)     (141,483 )     (22,084 )     (411,761 )     (184,865 )
                                 
Net loss   $ (286,690 )   $ (246,767 )   $ (1,034,681 )   $ (1,184,497 )
                                 
Basic and diluted net loss per share:   $ (0.02 )   $ (0.01 )   $ (0.06 )   $ (0.07 )
                                 
Weighted average number of common shares outstanding - basic and diluted     17,376,012       16,810,582       17,369,012       16,622,864  
                                 


INTELLINETICS, INC. and SUBSIDIARY
Condensed Consolidated Balance Sheets
             
    September 30,     December 31,  
    2017     2016  
    (Unaudited)        
ASSETS                
Current assets:                
Cash   $ 183,703     $ 689,946  
Accounts receivable, net     457,070       259,497  
Prepaid expenses and other current assets     164,959       150,620  
                 
Total current assets     805,732       1,100,063  
                 
Property and equipment, net     23,969       18,783  
Other assets     10,284       10,285  
                 
Total assets   $ 839,985     $ 1,129,131  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
                 
Current liabilities:                
Accounts payable and accrued expenses   $ 830,472     $ 767,197  
Deferred revenues     562,057       665,460  
Deferred compensation     215,012       215,012  
Notes payable - current     518,265       360,496  
Notes payable - related party - current     157,322       38,307  
Total current liabilities     2,238,128       2,046,472  
                 
Long-term liabilities:                
Notes payable - net of current portion     554,251       585,782  
Notes payable - related party - net of current portion     329,408       299,447  
Deferred interest expense     154,832       158,062  
Other long-term liabilities - related parties     25,931       1,125  
                 
Total long-term liabilities     1,064,422       1,044,416  
                 
Total liabilities     3,347,550       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 September 30, 2017 and December 31, 2016, respectively     30,380       26,816  
Additional paid-in capital     13,451,486       12,966,177  
Accumulated deficit     (15,989,431 )     (14,954,750 )
Total stockholders’ deficit     (2,507,565 )     (1,961,757 )
Total liabilities and stockholders’ deficit   $ 839,985     $ 1,129,131  
                 


INTELLINETICS, INC. and SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
(Unaudited)
       
    For the Nine Months Ended
September 30,
 
    2017     2016  
             
Cash flows from operating activities:                
Net loss   $ (1,034,681 )   $ (1,184,497 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization     9,016       8,160  
Bad debt expense     6,646       758  
Amortization of deferred financing costs     59,761       2,124  
Amortization of beneficial conversion option     188,385       -  
Stock issued for services     57,500       62,500  
Stock options compensation     91,063       113,589  
Note conversion warrant expense     -       137,970  
Note offer warrant expense     54,015       -  
Changes in operating assets and liabilities:                
Accounts receivable     (204,219 )     (112,814 )
Prepaid expenses and other current assets     (14,338 )     (125,544 )
Accounts payable and accrued expenses     63,275       (116,262 )
Other long-term liabilities - related parties     24,806       (12,852 )
Deferred interest expense     (3,230 )     23,226  
Deferred revenues     (103,403 )     (46,007 )
Total adjustments     229,277       (65,152 )
Net cash used in operating activities     (805,404 )     (1,249,649 )
                 
Cash flows from investing activities:                
Purchases of property and equipment     (14,202 )     (6,867 )
Net cash used in investing activities     (14,202 )     (6,867 )
                 
Cash flows from financing activities:                
Sale of Common Stock     -       559,285  
Exercise of stock options     -       3,500  
Payment of deferred financing costs     (103,328 )     -  
Proceeds from notes payable     560,000       -  
Proceeds from notes payable - related parties     150,000       -  
Repayment of notes payable     (268,195 )     (180,000 )
Repayment of notes payable - related parties     (25,114 )     (83,834 )
Net cash provided by financing activities     313,363       298,951  
                 
Net increase (decrease) in cash     (506,243 )     (957,565 )
Cash - beginning of period     689,946       1,117,118  
Cash - end of period   $ 183,703     $ 159,553  
                 
Supplemental disclosure of cash flow information:                
Cash paid during the period for interest and taxes   $ 89,071     $ 35,808  
                 
Supplemental disclosure of non-cash financing activities:                
Accrued interest notes payable converted to equity   $ -     $ 35,038  
Discount on notes payable for beneficial conversion feature     248,523       -  
Discount on notes payable - related parties for warrants     38,836       -  
Notes payable conversion warrant expense     -       113,762  
Notes payable conversion underwriting warrant expense     -       24,207  
Notes payable converted to equity     -       135,000