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Intellinetics Inc. reported its fourth-quarter 2024 earnings, surpassing expectations with an earnings per share (EPS) of -$0.01, compared to the forecasted -$0.06. The company’s revenue also exceeded projections, coming in at $4.28 million against a $4.26 million forecast. Despite these positive results, the stock experienced a 1.6% decline in after-hours trading, closing at $11.10. According to InvestingPro data, the company maintains a moderate debt level and has achieved an impressive 54.17% return over the past year, though current analysis suggests the stock may be trading above its Fair Value.
Key Takeaways
- Intellinetics reported a smaller-than-expected loss per share, beating EPS forecasts.
- Revenue for Q4 2024 grew by 2.1% year-over-year, reaching $4.3 million.
- SaaS revenue increased by 11.8% in the fourth quarter.
- The company’s stock fell by 1.6% in after-hours trading despite the earnings beat.
- Intellinetics plans to invest heavily in sales and marketing, impacting future EBITDA.
Company Performance
Intellinetics showcased a solid performance in the fourth quarter of 2024, with revenue rising by 2.1% year-over-year to $4.3 million. This growth was primarily driven by an 11.8% increase in SaaS revenue. However, the company reported a full-year net loss of $546,000, a significant shift from the net income of $519,000 in 2023. The company’s focus on expanding its product offerings and market presence has necessitated increased investments, which have impacted profitability.
Financial Highlights
- Revenue: $4.3 million (up 2.1% year-over-year)
- Full-year revenue: $18 million (up 6.7% year-over-year)
- EPS: -$0.01 (forecast was -$0.06)
- Consolidated gross margin: 65.8% in Q4 (up 88 basis points)
- Adjusted EBITDA: $2.5 million in 2024 (down from $2.7 million in 2023)
Earnings vs. Forecast
Intellinetics outperformed its EPS forecast for Q4 2024, reporting a loss of $0.01 per share against an expected loss of $0.06. This represents a positive surprise of approximately 83%. The revenue also slightly exceeded expectations, indicating strong operational performance.
Market Reaction
Despite the earnings beat, Intellinetics’ stock price declined by 1.6% in after-hours trading, closing at $11.10. This movement could reflect investor concerns over the company’s future profitability, given its plans for increased spending on sales and marketing. The stock remains within its 52-week range, between a low of $5.85 and a high of $16.50.
Outlook & Guidance
Looking ahead, Intellinetics expects revenue growth in fiscal 2025 but anticipates a more than 50% reduction in EBITDA due to strategic investments in sales, marketing, and development. The company aims to accelerate SaaS revenue growth over the next four to five years, with a focus on the K-12 and homebuilder markets.
Executive Commentary
CEO Jim D’Sociio highlighted, "Over 11,000 invoices a month with zero human intervention," underscoring the efficiency of their new payables automation solution. He also noted, "We view payables automation as a transformative opportunity," emphasizing the strategic importance of this innovation.
Risks and Challenges
- Increased investment costs are expected to pressure EBITDA in the short term.
- The company faces potential challenges in scaling its operations to meet growing demand.
- Market saturation in the K-12 and homebuilder sectors could limit growth.
- Macroeconomic pressures could impact customer spending.
- Competition from other SaaS providers remains a significant challenge.
Q&A
During the earnings call, analysts inquired about customer implementations and the company’s expansion into new vertical markets. The management discussed customer adoption rates and the anticipated return on investment, highlighting the potential for growth in digital transformation and SaaS solutions.
Full transcript - Intellinetics Inc (INLX) Q4 2024:
Conference Operator: Greetings and welcome to the Intelenetics Fourth Quarter and Full Year twenty twenty four Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, CFO, Joe Spain.
Thank you. You may begin.
Joe Spain, CFO, Intelenetics: Thank you. Good afternoon, everyone. I’m covering the Investor Relations intro today, so I am pleased to welcome you to Intelenetics twenty twenty four fourth quarter conference call. Before we begin, I’d like to remind listeners that during this conference call, comments made by management may include forward looking statements regarding Intelinetics Inc. That are not historical facts.
These forward looking statements are based on the current expectations and beliefs of management, and they are subject to risks and uncertainties that could cause such statements to differ materially from actual future events or results. Intelenides Inc. Undertakes no duty to update any forward looking statements. For more information about factors that may cause actual results to differ materially from forward looking statements, please refer to the press release issued today as well as risks and uncertainties included in the section under the caption Risk Factors and Management’s Discussion and Analysis of Financial Condition and Results of Operations in our annual report on Form 10 K filed earlier today. Also, please note that on the call today, management will discuss non GAAP financial measures such as adjusted EBITDA and recurring revenue.
Non GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP and may be different from non GAAP financial measures presented by other companies. A reconciliation between GAAP and non GAAP measures can be found in the press release issued today. With all that said, I would now like to turn the call over to Jim D’Sociio, Intelinetics’ President and CEO. Jim, the call is yours.
Jim D’Sociio, President and CEO, Intelenetics: Thank you, Joe. Twenty twenty four was another solid year for us as we continue our mission. We were investing to exploit our opportunity to grow more rapidly as we transform into a predominantly SaaS driven company with a diverse growing suite of solutions for our customers in the digital transformation space. On top of that, we completed 2024 with another extremely strong year of cash flow generation. Our main story continues to be our payables automation solution.
We are confident it will be the driver to take our business to the next level. As I’ve said in prior quarters, I’ve been in software my entire career and this launch is going as well or better than any launch I’ve been involved with. Customer acceptance is high and the ROI story for our customers is amazing. One of our largest customers is processing over 11,000 invoices a month with zero touch. Let me say that one more time, over 11,000 invoices a month with zero human intervention.
Those are significant results and we’re very proud of our solution. In last quarter’s call, I referenced our presentation at the Builder Smarter Conference, the annual user conference for homebuilders hosted by our ERP partner, Constellation Homebuilder Systems, and the buzz around the customer ROI of our solution. Since that conference in October, we have closed four new payables automation orders for Constellation customers and have launched a pilot program with a leading North American homebuilder and a land developer who is one of Constellation’s largest customers. We’re on schedule to release our new complementary purchase order solution at the end of this quarter. Purchase order will expand our opportunity base while also adding PO transaction volume to over half of our existing customers who are using only the accounts payable functionality today.
This will add incremental revenue to our existing AP customers. We have also recently launched our payables automation solution into the K-twelve market in coordination with our partner Software Unlimited Incorporated. After a pilot program with Clear Creek Community Schools, we have closed two additional Iowa school districts and engaged our K-twelve sales force and marketing team in February. Our K-twelve pipeline is growing quickly. The K-twelve customers can generally implement in less than half the time of the larger homebuilder entities.
As a matter of fact, Independence Community School District went live in January and has already caught the attention of their school board. According to their finance director, the school board likes the automated aspect of the system not only because it greatly reduces the opportunity for human error and speeds payment processing, but also because it allows them to spend their time on more meaningful tasks. To quote her, even though we are just beginning to take advantages of the features available in the system, we are already more efficient. If we stop today and didn’t implement any of the rest of the features, I would still be happy with what we’ve accomplished. Throughout the rest of the year, we will be co presenting with Software Unlimited at numerous K-twelve conferences and trade shows to drive deployment of our payables automation solution into an ecosystem of 1,300 school districts.
Our first priority is to make significant inroads in these two populations. We’re not waiting on those alone, though, and we have resources focused on finding the next partners like Constellation and Software Unlimited. We have an opportunity with niche ERP providers where we can outperform and out support competing generic solutions. Further, unlike with many of the larger software solution providers who offer similar solutions as we do, we are not competitors with regard to our partners’ core ERP systems. Accordingly, as we have been communicating, now is the time for us to invest in scaling our business.
We began in earnest in the latter part of 2024, hiring more sales reps, implementation management and additional help desk support. We’ve continued investing in 2025 with bringing on sales engineering resources and a VP of sales to strengthen and institutionalize our sales tools and processes as we grow. We’ve also expanded our outbound sales efforts with internal and contracted resources. Our marketing spend will include more frequency and a larger presence at select trade shows as well as expanded campaigns. These investments will modestly and we expect temporarily reduce our EBITDA, but we also expect that they will bring revenue opportunities that should exceed the spend and be accretive at the same point in later 2025 and in 2026.
I’m greatly excited to be part of this mission. At this time, I’d like to turn the call over to our Chief Financial Officer, Joe Spain, to talk to you about our financials.
Joe Spain, CFO, Intelenetics: Thanks, Jim. I will now review our financial results for the fourth quarter of twenty twenty four. Total revenue for the quarter ended 12/31/2024 increased 2.1% to $4,300,000 as compared to $4,200,000 for the same period last year. The following are the components of our revenue presented on our statements of operations. SaaS, including hosting revenue, increased 11.8% to $1,500,000 for the quarter from $1,300,000 for the same period last year, primarily driven by early payables automation successes.
Software maintenance services were down 2.5% from 2023 as expected, reporting $300,000 in both periods. As a reminder, these revenues are from support agreements with customers continuing on our premise solution. Professional services revenue was flat at $2,200,000 for the quarter each year. The fourth quarter twenty twenty four produced the lowest growth of the year due to timing of large scanning projects earlier in the year. As a percentage of total revenue, professional services revenue was 52% of the total for the quarter, down from 53% last year.
Year to date, this revenue line has been strong, delivering 8.9% growth and a record revenue year for us for this line item at $10,000,000 compared to $9,200,000 last year. Consolidated gross margin increased 88 basis points to 65.8% for Q4 this year compared to 64.9% last year. The increase was driven by both better revenue mix, meaning from more growth weighted toward SaaS revenue and positive impact from price increases. Operating expenses increased 11% to $2,800,000 for Q4 ’twenty four compared to $2,500,000 in Q4 twenty twenty three. The increase was driven primarily by our investments in sales and marketing as part of our strategy to accelerate sale.
The sales and marketing expenses for the quarter increased 37% compared to the same period during 2023, which reflects all the investments in marketing and sales that Jim just noted. General and admin expense increased 4.2% quarter over quarter. Net loss for Q4 was $54,000 compared to net income of $62,000 for the same period last year, as our revenue and margin improvements were offset by increased sales and marketing expenses and an incremental $146,000 in share based compensation expense for the quarter over the prior quarter, which is a non cash expense. Net loss per share was $0.01 per share for basic and diluted shares compared to net income of $0.02 per basic share and $0.01 per diluted share last year. Our adjusted EBITDA for the quarter was $601,000 compared to an adjusted EBITDA of $754,000 for the same period in ’twenty three, which reflects again our sales and marketing initiatives.
Turning to the full year results. Total revenue for 2024 increased 6.7% to $18,000,000 as compared to $16,900,000 last year. SaaS revenue increased 10.8% and professional services revenue increased 8.9%. Consolidated gross margin was 64% compared to 62.6% last year. We’re very pleased to be able to improve these already strong margins.
Operating expenses increased 23.7% to $11,700,000 for 2024 compared to $9,500,000 in ’twenty three. This increase is driven by two primary factors. First, our share based compensation increased $830,000 year over year to $1,500,000 from $700,000 Our MD and A in the 10 ks provides a table for more granularity to compare year over year. The main takeaway for me to convey here today is that all but $70,000 of this increase is non cash. Without the share based compensation, operating expenses increased 14.9%, primarily driven by the annual sales and marketing expense increase of 18.6%.
Full year net loss was $546,000 compared to net income of $519,000 last year. Net loss per share was $0.13 per share compared to net income per basic share of $0.13 and per diluted share of $0.11 last year. Full year adjusted EBITDA, which takes into account the share based compensation was $2,500,000 compared to adjusted EBITDA of $2,700,000 for 2023. Here, our sales and marketing investments had a modest impact on the year end results. Next, I’ll turn to a brief review of Intelenac’s balance sheet.
At 12/31/2024, we had cash of $2,500,000 and accounts receivable net of $1,100,000 Our total assets were $18,600,000 including $9,200,000 in intangible assets and goodwill as part of acquisitions made since 2020. Total liabilities were $7,900,000 including $1,300,000 in debt to principal as of 12/31/2024, which is due 12/31/2025. Deferred revenues were $3,400,000 reflecting signed SaaS and maintenance contracts. Regarding cash flow, Jim mentioned it, we had a tremendous year. Our cash flow statement shows cash provided by operating activities was $3,900,000 From this, we prepaid $1,600,000 of our debt and are able to fund our sales and marketing investments out of cash flow.
I want to wrap up with a brief financial outlook. Based on our current plans and assumptions and subject to risks and uncertainties we described in our filings and this call, we expect that we will grow revenues on a year over year basis for fiscal twenty twenty five. Five. We also expect our 2025 EBITDA to be reduced by more than half compared to fiscal twenty twenty four due to increased investment in sales and marketing intended to provide returns on those investments in late twenty twenty five and beyond. With that, we thank you all for listening.
And at this time, we’d like to open up the call to Q and A.
Conference Operator: Thank you. We will now be conducting a question and answer session. Our first question comes from the line of Howard Halpern with Tagus Brothers. Please proceed with your question.
Howard Halpern, Analyst, Tagus Brothers: Congratulations guys on the year and the smooth transition that you’re making.
Joe Spain, CFO, Intelenetics: Thank you.
Howard Halpern, Analyst, Tagus Brothers: In terms of the number of customers, how many are actually live and how many would you expect or should we model for to go live in the second half of the year?
Jim D’Sociio, President and CEO, Intelenetics: That is Jim. Yes. Yes. That’s a good question, Howard. And the majority of the customers, we had two customers go live last week or in the last two weeks, and we have five in the process of implementation right now.
And as I said a number of times, they’re going very smoothly. And the more that we get up and running, the more references we’re going to have and the faster the word is going to spread throughout the prospect and our pipeline.
Howard Halpern, Analyst, Tagus Brothers: Okay. Does that in ones that are live, does that include last call you talked about a large customer that you are anticipating getting live in the first quarter. Does that include that customer live?
Jim D’Sociio, President and CEO, Intelenetics: Yes. That was one of the larger Constellation customers and I referenced it in my discussion around how many invoices that they see as throughput. And just a note, they’re still coming up live and as you’re doing capture and it’s educating itself, the more invoices you do every month, it just continues to educate the system educates itself. And that’s only 75%, eleven thousand of the total invoices they’re doing. So as the system continues to be used week after week, month after month, they’ll get we hope to get up to seventy percent eighty percent ninety percent of throughput without any human intervention.
And that is probably industry standard of 8590% which is great.
Howard Halpern, Analyst, Tagus Brothers: Okay. And that’s the enterprise side. Do you expect the same type of throughput on the K-twelve side? Well, they’re
Jim D’Sociio, President and CEO, Intelenetics: not doing the same amount of volume. But as we’ve learned from our early beta sites and our first couple of customers, extremely happy. And as you saw from the independent school district where the VP of Finance is just ecstatic with how she’s able to take, I don’t want to say it’s one full headcount or two full headcounts, but it certainly reduced the amount of touch human touch substantially. And with school districts, the COVID money is dried up in school districts. They all have to start finding better ways to invest their money and this bodes very, very well for us.
And we’re continuously working with Software Unlimited. In the future, we plan to integrate into their system, tightly integrate to their system as well, which will provide more value to their customer base also.
Howard Halpern, Analyst, Tagus Brothers: As part of expanding beyond, I know you still have a long runway with Constellation and the Software Unlimited, but what type of verticals maybe you can get into? And does getting into the school districts, could that bleed over to like county or local governments wanting your system?
Jim D’Sociio, President and CEO, Intelenetics: Yes. As a matter of fact, we’re talking to a number of different ERP players, another rather large school ERP who have about two two thousand three hundred customers. We’re also talking we had a press release a couple of months ago with someone who provides ERP systems to counties and municipalities. So that is a big area for us. And it’s an underserved area for the marketplace as well because of being able to cost effectively sell into those marketplaces.
Howard Halpern, Analyst, Tagus Brothers: And are you in the Constellation universe, are you seeing any kind of hesitation from the customers in terms of how they want to deploy their budgets or is this just an easy to sell to get it up and running because of the ROI?
Jim D’Sociio, President and CEO, Intelenetics: Well, we found that there’s a tremendous ROI. A lot of the customers are waiting for a release of purchase order, which is imminent. But obviously, the housing market with interest rates up and some of the other challenges they’ve had are being cautious. But my experience in selling business software is when companies are doing really, really well, they don’t give they don’t really focus on the spend side. But when it gets tight, they go, oh, we need to save money.
So this is it should be a good opportunity for us to come in and show a great ROI on the spend side of their budgets. So we think we’re well positioned for that.
Howard Halpern, Analyst, Tagus Brothers: And one final one, because in Q4, the SaaS line margin actually got up above that 85% level. Was that driven by these new SaaS customers? And should we see it maintained probably at that 85% plus level?
Jim D’Sociio, President and CEO, Intelenetics: Joe, you want to handle that one? I would say it is because the customer is coming up live, yes.
Joe Spain, CFO, Intelenetics: Yes. And some of it I mean, there could be some timing. I think it’s not an unreasonable range. That mid-80s, it’s not going to be static. It’s going to move depending on the nature of the customer and the level of average.
Some are easier than others. So it’s going to move a little, but it’s going to move within that narrow mid-80s range.
Howard Halpern, Analyst, Tagus Brothers: Okay. Okay. Thank you.
Jim D’Sociio, President and CEO, Intelenetics: If you remember because of yes, Software Unlimited does all their selling and implementation and our margins on the document management side is about 90% selling with Software Unlimited. So that should maintain itself on that selling into their customer base.
Howard Halpern, Analyst, Tagus Brothers: Okay. That sounds great. Keep up the good work, guys.
Jim D’Sociio, President and CEO, Intelenetics: Thank you.
Joe Spain, CFO, Intelenetics: Thank you.
Jim D’Sociio, President and CEO, Intelenetics: Thank you, Howard. Okay. I think we’ll wrap it up. So let me just do my closing statements. Intelinetics is well positioned for continued success.
We have significant momentum and a strong competitive position in a growing market and a diverse set of solutions with ample cross selling opportunities. Our business model structured around recurring revenue and aggressively growing our SaaS revenue is working. Our Payables Automation Solutions provide an extremely quick return on investment for our customers and offers our company a clear organic growth opportunity to rapidly grow our SaaS revenue over the next four to five years, just with continuing a successful rollout with existing partners. We view payables automation as a transformative opportunity for our company, and we plan to continue to make investments to position the product for as rapid an adoption as we can drive. In addition to sales and marketing initiatives, we plan to enhance our development capabilities to bring features to market more quickly and to bring our solutions to new ERP partnerships, which become additional ecosystems for happy customers.
We appreciate the continued support of our longtime shareholders and aim to attract new investors as well by delivering strong and consistent financial results. Thank you all for joining our call, and we look forward to a great 2025. Thank you.
Conference Operator: Thank you. And ladies and gentlemen, this concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
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