Earnings call transcript: Intellinetics misses Q1 2025 earnings, stock rises

Intellinetics Inc. (INLX) reported a wider-than-expected loss for the first quarter of 2025, with earnings per share (EPS) at -$0.17, missing the forecast of -$0.07. Revenue also fell short of expectations at $4.25 million compared to the projected $4.6 million. Despite the earnings miss, the stock price rose 2.62% in aftermarket trading to $13.33, reflecting a cautious optimism among investors. According to InvestingPro analysis, the company appears overvalued at current levels, trading at a significant EBITDA multiple of 56.35x.

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Key Takeaways

• Intellinetics reported a significant earnings miss, with EPS at -$0.17 versus a forecast of -$0.07.
• Revenue for Q1 2025 decreased by 5.8% year-over-year, coming in at $4.25 million.
• The company’s stock price increased by 2.62% in aftermarket trading, suggesting investor confidence in future prospects.
• SaaS revenue grew by 9.8%, indicating a strong potential growth area.
• Gross margin improved to 67.6%, showcasing operational efficiency gains.

Company Performance

Intellinetics experienced a challenging first quarter in 2025, with both revenue and earnings falling short of expectations. Total revenue decreased by 5.8% to $4.2 million, while the net loss widened significantly to $728,000 from $175,000 a year earlier. Despite these setbacks, the company highlighted growth in its SaaS segment and improved gross margins, positioning itself for future recovery amidst current market challenges. InvestingPro data shows the company has achieved impressive revenue growth of 6.7% over the last twelve months, with a strong five-year revenue CAGR of 48%.

Financial Highlights

• Revenue: $4.2 million, down 5.8% year-over-year
• Earnings per share: -$0.17, compared to -$0.04 in the previous year
• Gross margin: 67.6%, an increase of 322 basis points from the prior year
• Adjusted EBITDA: $77,000, down from $673,000 last year

Earnings vs. Forecast

Intellinetics’ actual EPS of -$0.17 missed the forecast of -$0.07 by a significant margin. The revenue also fell short, reported at $4.25 million against a forecast of $4.6 million. The earnings miss represents a notable deviation from expectations, reflecting challenges in the current operating environment.

Market Reaction

Despite the earnings miss, Intellinetics’ stock saw a 2.62% increase in aftermarket trading, closing at $13.33. This movement suggests that investors may be focusing on the company’s strategic initiatives and potential for future growth, rather than the immediate financial setbacks.

Outlook & Guidance

Looking ahead, Intellinetics expects revenue growth for fiscal 2025, driven by continued expansion in SaaS offerings and new market entries, such as the K-12 sector. The company plans to maintain positive adjusted EBITDA, although it anticipates a reduction due to ongoing investments in infrastructure and product development.

Executive Commentary

CEO Jim DiSoccio emphasized the transformative potential of the company’s new payables automation solution, stating, "We view payables automation as a transformative opportunity for our company." He also highlighted the importance of current investments, noting, "Now is the time for us to invest in scaling our business."

Risks and Challenges

• Tariffs and high interest rates continue to pose market headwinds.
• Increased competition in digital transformation solutions could impact growth.
• The company’s significant net loss and revenue miss may affect investor confidence.
• Ongoing investments could pressure short-term profitability.

Q&A

During the earnings call, analysts focused on the company’s expansion efforts and market challenges. Key discussions included the successful launch of K-12 products and the impact of market conditions on the homebuilding sector. The management confirmed a project queue of $3 million for professional services, indicating a strong pipeline for future growth.

Full transcript - Intellinetics Inc (INLX) Q1 2025:

Conference Operator: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Roger Grabner, Director of Marketing.

Thank you. You may begin.

Roger Grabner, Director of Marketing, Intelenetics: Thank you, and good afternoon, everyone. I’m pleased to welcome you to Intelenetics’ twenty twenty five first quarter conference call. Before we begin, I would like to remind listeners that during this conference call, comments made by management may include forward looking statements regarding Intelionetics Inc. That are not historical facts. These forward looking statements are based on 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.

Intelenetics 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 Discussion and Analysis of Financial Conditions and Results of Operations in Intelenetics’ annual report on Form 10 ks or the quarterly report on Form 10 Q filed today. Also, note that on the call today, management will discuss non GAAP financial measures such as adjusted EBITDA and total contract value. Non GAAP financial measures are not limited are not intended to be considered in isolation or 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 like now to turn the call over to Jim DiSoccio, Intelionetics’ President and CEO. Jim, the call is yours.

Jim DiSoccio, President and CEO, Intelenetics: Thank you, Roger. Our payables automation solution 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 adoption as we can drive. We have more reference accounts than we ever have, and that number will grow quarterly. With our homebuilder ERP partner, we closed two orders in February and two in March.

And with our K-twelve partner, we closed three more in the first quarter. 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. Because we have a solution with a very rapid and identifiable payback with an identifiable market that dwarfs our historic performance, now is the time for us to invest in scaling our business as we transform into a predominantly SaaS driven company with a diverse growing suite of solutions for customers in the digital transformation space. We’ve continued in 2025 to strengthen and institutionalize our sales tools and processes. For example, by hiring a sales engineer, senior payables automation solutions consultant and VP of Sales, all of whom have significant experience with both the solutions we offer and markets we serve.

We’ve also made investments in IT infrastructure and controls for SOC two certification, believing certification offers significant benefits, including increased customer trust and loyalty, improved cybersecurity risk mitigation and creates a competitive advantage over noncompliant SaaS providers. As expected and called out in prior communications, these investments reduced our EBITDA temporarily. We believe that these investments will bring additional revenue opportunities that should exceed the speed and be accretive exceed the spend and be accretive at some point in later 2025 and into 2026. While our SaaS business continues to grow, our professional services business had a weak quarter. Shareholders should know that orders have already picked up this quarter.

Earlier this quarter, we achieved our biggest single order intake week in years. The record breaking week for over $2,400,000 of total contract value in new project contracts was driven by numerous state agencies and commercial clients, with revenue expected to be recognized over the next six to seven months as work is completed. In addition, last week, we received authorization to begin work and therefore begin revenue recognition on an $880,000 deal total contract value, multi month scanning project that was sold in Q4 of twenty twenty four, but had document pickup delayed by the client. These projects so we just started picking up those that work this week. These projects will enable us to resume work at more historical levels in the coming months.

Hopefully, recent political events that created uncertainty in the first part of this year are moving behind us, and we will enjoy more of the tailwind our products and services, ROI and gender. At this time, I would like to turn the call over to our Chief Financial Officer, Joe Spain.

Joe Spain, Chief Financial Officer, Intelenetics: Thank you, Jim. I will now review our financial results for the first quarter twenty twenty five. Total revenue for the quarter ended 03/31/2025 decreased 5.8% to $4,200,000 as compared to $4,500,000 for the same period last year. The following are the material components of our revenue presented on our statements of operations. First, SaaS, including hosting revenue, grew 9.8% to $1,500,000 for the quarter from $1,400,000 for the same period last year, primarily driven by continued payables automation early successes.

Software maintenance services were down as expected, decreasing $22,000 or 6.4% from 24,000 As a reminder, these maintenance revenues are from support agreements with customers continuing on our premise solution. Professional services revenue decreased to 13.2% to 2,200,000 for the quarter from $2,500,000 for the same period last year. Jim has just discussed the timing issues driving this decrease. As a percent of total revenue, professional services revenue was 51% of total revenue for the quarter compared to 55 last year. Consolidated gross margin percent increased three twenty two basis points to 67.6% for Q1 this year compared to 64.3% last year.

The increase was driven by better revenue mix as a result of reduced professional services revenue, but also importantly strengthening of our SaaS margins, which grew 142 basis points to 86.1% from 84.6% last year. Operating expenses increased 21.1% to $3,600,000 for Q1 twenty twenty five compared to $2,900,000 in Q1 twenty twenty four. The increase is driven by our investments in sales and marketing as well as infrastructure, which is reflected in admin. Jim has discussed these already as part of our strategy to accelerate sales and enabling us to scale. Net loss for Q1 was $728,000 compared to a net loss of $175,000 for the same period last year.

The primary driver here was the increased spending levels in SG and A to enable us to achieve our sales growth this year in 2026 and beyond. Loss per share was $0.17 per share compared to loss per share of $04 last year. Our adjusted EBITDA for the quarter was $77,000 compared to an adjusted EBITDA of $673,000 for the same period in ’twenty four. The difference again are the same investment factors we just discussed. Next, I’ll turn to a brief overview of our balance sheet.

At March 31, we had cash of $2,100,000 and accounts receivable net of $1,400,000 Our total assets were $18,000,000 including $9,100,000 in intangible assets and goodwill as part of acquisitions made since 2020. Total liabilities were $7,600,000 including $2,900,000 in deferred revenues, reflecting signed SaaS and maintenance contracts and $1,350,000 in debt principal as of 03/31/2025. Given our sales and marketing initiatives, we’ve temporarily paused our aggressive prepayments of our debt, and we will continue to assess the best use of our capital. For those watching our filings, you’ll have seen our Form S-three for a shelf registration. This will enable us to act quickly to further strengthen our balance sheet.

As Jim noted, we do not want to miss the market opportunity we see before us. I want to wrap up with our financial outlook. Based on our current plans and assumptions and subject to risks and uncertainties we describe in our filings in this call, we expect no change to the guidance we just gave in March that we will grow revenues on a year over year basis for fiscal ’twenty five, particularly growing SaaS revenues and maintaining positive adjusted EBITDA. The company expects its ’twenty five adjusted EBITDA will be reduced by more than half compared to fiscal ’twenty four due to the increased investments in sales and marketing intended to provide returns on those investments in late ’twenty five and beyond. With that, we thank you all for listening.

And at this time, we’d like to open the call up to Q and A.

Conference Operator: Thank you. We will now be conducting a question and answer session. And our first question comes from the line of Howard Halpern with Taglich Brothers. Please proceed with your question.

Howard Halpern, Analyst, Taglich Brothers: Congratulations on continuing to move fast forward. That’s a good sign. In terms of so you talked about, I guess, seven new customers, I guess, in the first quarter. With those being implemented over the next number of months, how many implementations will you have? And what would those implementations mean in terms of annual recurring revenue?

Jim DiSoccio, President and CEO, Intelenetics: I don’t have the revenue I don’t have the recurring revenue off the top of my head for the ones that are going live, but we’ll have about 22 to 23 customers at this point using the SaaS product the payables automation product.

Howard Halpern, Analyst, Taglich Brothers: Okay. And how is the I don’t know if implementation is the right word, but on the not the payables, but the other side of the equation, the purchase orders?

Jim DiSoccio, President and CEO, Intelenetics: Purchase orders, we released our first we had our first release of payables order. This went out in the April. We’ve already done four or five presentations. We’re getting good feedback on the product, look and feel. Again, just to keep in mind, it is a first release.

So, it is maturing. We have other future leases planned as we go forward. But we’re very bullish on that. And the initial feedback we’ve gotten has been very, very strong. I’ve actually had an outside consultant who’s been in the payables automation space for fifteen years or so, worked for SAP and some of the other big ERP players, and he gave it very, very high marks for look and feel and initial functionality.

But again, it is a first release. And in any first release, have more we have a development roadmap to continue to enhance that product.

Howard Halpern, Analyst, Taglich Brothers: Okay. And I’ll just ask this, but it seems like it might not be impacting you based on the number of implementations you’re going to have this year. You’re not seeing any customer hesitation at all in maybe stretching out the timing of implementations? Or is that sort of fear behind us?

Jim DiSoccio, President and CEO, Intelenetics: Well, it’s actually the hesitation I would think is what’s going on in the market, the headwinds that the tariffs have created between The U. S. And Canada. Interest rates are high in the building industry, so that slowed little bit more aware of how many new houses they’re selling. So it’s more from that side, having anything to do with our profit and hesitation of buying our product.

It’s more about what’s going on in our key demographic, which is the building industry.

Howard Halpern, Analyst, Taglich Brothers: Okay. And with the new orders coming in professional services side, are those relatively stable to margin type of opportunities that we should model into?

Jim DiSoccio, President and CEO, Intelenetics: Yes, most definitely. We had a dip. We’ve always been very successful selling a big,

Jim DiSoccio, President and CEO, Intelenetics: I want to say, 7 figure deal, high 6 figure deal. And we did sell one in the fourth quarter. And for their reasons, they said, well, we signed. And then when we went to pick it up, they said, well, we need to delay it for a couple of months. And they’ve just committed for us to start that project.

So with the $2,400,000 we sold in March, which was obviously great, great for our backlog, that other 880,000 is added on top of that. So we’re well over $3,000,000 of work we have in our queue to perform going forward, which should really help get our numbers back to where they’ve been historically.

Howard Halpern, Analyst, Taglich Brothers: Okay. And then just one last one is more of a not a base business question. You have do you still have is it a little bit in excess of 600 ks through 12 customers that you serve?

Jim DiSoccio, President and CEO, Intelenetics: Yes. Yes. The

Jim DiSoccio, President and CEO, Intelenetics: that’s another part of our growth strategy for the payables automation and capture as a service solution that we offer. We just launched that. I want to say in April, beginning of April, we just trained our sales our K-twelve sales staff on that product. And we’ve already started selling into that marketplace. We sold, I believe, four to five.

Right now, we had a couple of beta sites. The beta sites went very well. And then we did have a press release of Independent School District of Iowa. And with the financial department, we can send that to anybody who’s interested, touting the great how great the product was and has actually done a testimonial for us and actually spoke at a K-twelve user group for us, touting how great the product was. So we expect good growth on that side.

And one other thing, we just renegotiated our contract with our K-twelve partner, Software Unlimited, that they will now be selling and representing the payables automation product as well. So a lot of

Howard Halpern, Analyst, Taglich Brothers: good things happening on all sides with that product, Howard. Okay. Well, thanks and keep up the great work guys.

Jim DiSoccio, President and CEO, Intelenetics: You. We’re very bullish on the future.

Conference Operator: Thank you. And we have reached the end of the question and answer session. I would like to turn the floor back to President and CEO, Jim DiSoccio, for closing remarks.

Jim DiSoccio, President and CEO, Intelenetics: Thank you. As I said, Intelenetics is well positioned for continued success. We believe in our strong competitive position in growing markets and our diverse set of solutions with ample cross selling opportunities. We further believe that it is absolutely the right strategy to reinvest our historically strong cash flow into the company, particularly sales and marketing and development in order to accelerate our growth. We appreciate the continued support of our long term shareholders and aim to attract new investors as well by delivering strong and consistent financial results.

Thank you for joining us today, and we look forward to speaking again at our next conference call. Thank you, and have a great evening.

Conference Operator: Thank you. This does conclude today’s conference, and you may disconnect your lines at this time. We thank you for your participation, and have a great day.

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