Earnings call transcript: Intellinetics Q2 2025 reports mixed results

Intellinetics Inc. (INLX) reported its second-quarter earnings for 2025, revealing a mixed financial performance. The company posted an earnings per share (EPS) of -0.13, missing the forecasted -0.11, while revenue reached $4.01 million, falling short of the expected $4.77 million. Following the earnings release, the stock price remained unchanged at $10.49, close to its 52-week low of $8.25. According to InvestingPro data, the stock has declined over 7% in the past week and is currently trading above its Fair Value estimate.

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Key Takeaways

• Intellinetics missed both EPS and revenue forecasts, with surprises of -18.18% and -15.93%, respectively.
• SaaS revenue grew by 12.6%, highlighting a positive trend in recurring revenue streams.
• The company successfully paid off $7.6 million in debt, strengthening its balance sheet.
• Professional services revenue saw a significant decline of 29%, impacting overall performance.
• Guidance suggests 2025 revenues will be lower than 2024, raising concerns about future growth.

Company Performance

Intellinetics experienced a challenging quarter with a 13.6% decline in total revenue to $4 million. Despite this, the company saw a positive shift in its SaaS segment, which grew by 12.6% to $1.6 million. However, a 29% drop in professional services revenue to $1.9 million weighed heavily on overall performance. The company also reported a net loss of $568,000, in contrast to a net income of $75,000 in the same period last year. InvestingPro data shows the company operates with a moderate debt level, with a debt-to-equity ratio of 0.33 and maintains a gross profit margin of nearly 65%.

Financial Highlights

• Revenue: $4 million, down 13.6% year-over-year.
• Earnings per share: -0.13, compared to -0.11 forecasted.
• Gross margin: Increased to 68% from 64.7% the previous year.
• Adjusted EBITDA: Dropped to $28,000 from $698,000.

Earnings vs. Forecast

Intellinetics reported an EPS of -0.13, missing the forecast of -0.11 by 18.18%. Revenue also fell short of expectations by 15.93%, coming in at $4.01 million compared to the forecasted $4.77 million. This marks a significant miss in both metrics, indicating challenges in meeting market expectations.

Market Reaction

The stock price of Intellinetics remained stable at $10.49 following the earnings announcement, with no significant change in pre-market or aftermarket trading. This stability comes despite the earnings miss, suggesting that investors may have already priced in some of the anticipated challenges. The stock’s beta of 0.59 indicates lower volatility compared to the broader market, while trading volume remains modest at 10,000 shares daily. InvestingPro’s comprehensive analysis reveals the company’s overall Financial Health score is "FAIR," with particularly strong metrics in cash flow management.

Outlook & Guidance

Looking ahead, Intellinetics expects its 2025 revenues to be lower than those of 2024, although it anticipates continued growth in its SaaS revenue. The company aims to maintain positive adjusted EBITDA, albeit at a reduced level compared to previous years. Future growth is targeted for the third and fourth quarters of 2025. With a market capitalization of $53.4 million and last twelve months EBITDA of $420,000, the company trades at an elevated EBITDA multiple, suggesting investors are pricing in future growth potential.

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Executive Commentary

CEO Jim DiSoccio remarked, "We are at an inflection point," emphasizing the company’s strategic initiatives in AI integration and product innovation. He highlighted the value of their solutions, stating, "Our solutions bring ROI, efficiencies, and executive transparency." DiSoccio also noted market dynamics, saying, "We see the whole market changing right now."

Risks and Challenges

• Market conditions in construction and homebuilding are uncertain due to higher interest rates and potential tariff threats.
• The K-12 education market faces budget constraints, impacting decision-making.
• The significant drop in professional services revenue may indicate competitive pressures or market saturation.
• The company’s guidance for lower 2025 revenues could weigh on investor sentiment.

Q&A

During the earnings call, analysts queried about improvements in professional services margins and progress in the homebuilder customer pipeline. The company also discussed its expansion plans in the K-12 market and potential new vertical market partnerships.

Full transcript - Intellinetics Inc (INLX) Q2 2025:

Conference Operator: Greetings, and welcome to the Intelenetics Second Quarter twenty twenty five 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 Roger Grabner.

Thank you, Roger. You may begin.

Roger Grabner, Unspecified Executive, Intelenetics: Thank you, and good afternoon, everyone. I am pleased to welcome you to Intelenetics’ twenty twenty five second 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 Intelenetics 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.

And Telenetics 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 and in Telenetik’s Annual Report on Form 10 ks or the Quarterly Report on Form 10 Q filed today. Also, please note that on the call today, will discuss non GAAP financial measures such as adjusted EBITDA. 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 differ 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 DiSoccio, Intelenetics’ President and CEO. Jim, the call is yours.

Jim DiSoccio, President and CEO, Intelenetics: Thank you, Roger. We have a lot of great things going on and I’m excited to provide an update. First, I’d like to address our temporary reduction in revenue volume in Q2. The major contributor to our Q2 revenue results falling short of last year Q2 is the reduction of digital transformation work, showing up in our professional services revenue line. This reduction corresponds to the timing of our June 1 renewal of our five year contract with our largest customer.

We use the word temporary intentionally. We have since the signing of the contract rebuilt our backlog with orders in hand that will provide transformation work back to historical levels before the end

Conference Operator: of

Jim DiSoccio, President and CEO, Intelenetics: Q3. And this backlog of orders and work will take us into Q1 twenty twenty six without having to close another major contract, and we’re not stopping. Our goal is to have an even longer runway of backlog. In addition, we’ve just completed successful testing on a large microfilm conversion project that will add more revenue in Q4 and beyond. Further, as a reminder, our June 1 contract renewal is for five years with an additional five year extension.

That’s a very good time horizon for us, but we’re not resting there. We are working to expand sales through our other channels. We’ve had success there in recent years, taking our largest commercial reseller from $250,000 annual in annual revenue five years ago to over $750,000 in annual revenue in 2024. On the SaaS side, we’ve grown revenues 12.6% in Q2 this year over last year Q2. Frankly, I’m disappointed.

I wanted more growth than that. Two of our key target vertical markets have faced their headwinds this year, particularly in Q2. Construction and homebuilding faced stubbornly higher interest rates and the threat of tariffs, causing them to pause major projects. K-twelve education is worried about the impacts of cuts to public education. I want to be clear that without losing orders, but we are experiencing longer lead times on new sales from these factories.

A two month buy cycle can become three or even a bit longer. That said, we are currently seeing renewed activity and we are optimistic that customer decision makers are moving past the early pause button mentality and are seeing that our products save them time, money and provide expanded visibility into their critical performance data. We have modified our messaging to more crisply articulate that now is the time to realize the ROI that our solutions offer. More than ever, I continue to believe that now is the time to invest in sales and marketing to enhance what we do in every aspect of the customer lifecycle. From initial messaging, marketing campaigns, sales material and sales process and nurturing existing customers using a customer success model.

Some specific successes including include hiring industry and AI subject matter experts. Our enhanced industry expertise in the construction and homebuilding space specific to payables automation has already resulted in key payables automation win and we have improved our messaging to key buyers in the homebuilding market. Our strengthened AI expertise, expedients leveraging AI for more wins with customers and accelerated development. Our historical consolidating sales and market spend as a percent of revenue has barely broken into low teens. Usually fast growing software companies or SaaS software companies spend 40 percent or more of revenues on sales and marketing.

We’re financing our growth out of current cash flow as we have been and I believe that even with these modest investments, we can take our growth to the next level. Our investment in sales and marketing include identifying partners to expand our partner based customer acquisition model. Our increased infrastructure spending includes the development and implementation resources to programmatically bring on new partners, validate our solutions to the market and then accelerate integration. Our mission is to expand partner ecosystems and happy customers. Further, we’re committed to leveraging AI in several ways, which fall into three distinct core pillars.

One, new features including AI agents within our solutions. Two, marketing and customer support. And three, leveraging existing tools to significantly accelerate our internal development, both in bringing new features to market faster and enhancing the customer user interface and ensuring behind the scenes data center efficiencies and compliance. As you can tell from the excitement in my voice, we’re at an inflection point after successfully paying off $7,600,000 in debt and earn outs the last few years, 6,300,000.0 of that was from cash flow we generated and $1,300,000 in equity. We are now positioned to invest in sales and marketing and development as we transform ourselves to grow more rapidly.

Our solutions bring ROI, efficiencies and executive transparency. On top of that, our implementations are low fit, low exchange management relative to major players. Our customers win and we win. At this time, I would like to turn the call over to our Chief Financial Officer, Joe Spain. Joe?

Thanks, Jim. I will

Joe Spain, Chief Financial Officer, Intelenetics: now review our financial results for the second quarter twenty twenty five. Total revenue for the quarter ended June 3025 decreased 13.6% to $4,000,000 compared to $4,600,000 for the same period last year. Following are the material components of our revenue presented on our statements of operations. SaaS, including hosting revenue, grew 12.6 to $1,600,000 for the quarter from $1,400,000 from last year, primarily driven by continued early payables automation successes. Software maintenance services were down as expected, decreasing $24,000 or 6.6% from 2024.

As a reminder, these maintenance revenues are from support agreements with customers continuing on our premise solution. Professional services revenue decreased 29% to $1,900,000 for the quarter from $2,700,000 for the same period last year. Jim has already discussed the factors driving this decrease. As a percent of total revenue, professional services revenue was 49% of total revenue for the quarter compared to 56% last year. Margins have remained robust for each revenue line.

Consolidated gross margin percent increased three twenty eight basis points to 68 even for Q2 this year compared to 64.7% last year. The consolidated increase was driven by a favorable revenue mix, a result of reduced professional services volume. SaaS margins remained strong at 84.3% consistent with 84.5% last year. The other revenue lines were similarly consistent each within 50 basis points of 2024. Operating expenses increased 21.1% to $3,600,000 for Q2 twenty twenty five compared to $2,900,000 in Q2 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 investments as part of our strategy to accelerate sales and enabling us to scale. Net loss for Q2 was $568,000 compared to net income of $75,000 for the same period last year. There were two primary drivers for the change: one, the temporary reduction in professional services and two, the increased spending levels in selling general and admin to enable us to achieve our growth goals later this year in 2026 and beyond. Loss per share was $0.13 per share compared to net income per share of $02 per share last year.

Our adjusted EBITDA in the quarter was $28,000 compared to an adjusted EBITDA of $698,000 for the same period in 2024. The difference is driven by the same professional services and investment factors just discussed. Next, I’ll turn to a brief overview of Intelhedix balance sheet. At June 3025, we had cash of $2,100,000 and accounts receivable net of 800,000 Our total assets were $17,100,000 including $8,900,000 in intangible assets and goodwill as part of acquisitions made since 2020. Total liabilities were $5,600,000 including $2,600,000 in deferred revenues, reflecting signed SaaS and maintenance contracts and $1,900,000 in lease liabilities as of 06/30/2025.

As of June 30, our balance sheet is very strong with no debt. I want to wrap up with our financial outlook. Based on our current plans and assumptions and subject to risks and uncertainties we described in our filings and this call, we are revising our guidance and expect that 2025 revenues will be less than 2024 revenues driven by weakness in professional services in the first half of the year. However, the company expects to still grow SaaS revenues and maintain positive adjusted EBITDA. Our adjusted EBITDA guidance is unchanged from Q1 where we expect our 2025 adjusted EBITDA to reduced by more than half compared to fiscal year twenty twenty four due to increased investments 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 the call up to Q and A.

Conference Operator: 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: Good afternoon, guys. In terms of the professional services ramping back up to historic levels, should we also model out that margins will relatively healthy at historic levels or maybe even a little better than historical levels?

Jim DiSoccio, President and CEO, Intelenetics: Jim, do want to take that? I think they’ll be go ahead, Joe. Yes.

Joe Spain, Chief Financial Officer, Intelenetics: They’ll be yes, then a little bit better. We have A little bit better.

Jim DiSoccio, President and CEO, Intelenetics: That’s what I was going say.

Joe Spain, Chief Financial Officer, Intelenetics: Yes. The June 1 renewal, the five years plus the extension beyond that, that comes with some price increases embedded in there. So we would look to a little bit of improvement. Okay.

Howard Halpern, Analyst, Taglich Brothers: In terms of how many customers on the homebuilder side, how many of them are alive? And how many of them are maybe have paused? And do you expect to go live in the next six months?

Jim DiSoccio, President and CEO, Intelenetics: We just had a very positive review. Every week, every day, we’re talking about our customers going live. And percent of our customers are live right now and the rest of them are moving to live dates very aggressively. So we’re very confident now that this was a fairly new product as the product has matured over the last year or so. We’ve added more feature functionality and customers are starting to use it and they’re very, very happy.

Again, I’ve said this in the past. I’ve never I haven’t gotten any calls that people are dissatisfied, which is pretty unique in the software industry. And our customers are very happy and moving to live dates. And I would say the majority of them are referenceable too at this point. So it’s going very well.

Howard Halpern, Analyst, Taglich Brothers: And from this point forward, I know you said you were slightly disappointed with the 12% growth, but double digit SaaS line should grow double digits if nothing else out of the ordinary occurs and the pace you anticipate does occur in or in Yes. The

Jim DiSoccio, President and CEO, Intelenetics: We have the pipeline is very strong. We have not, as I said, lost any business. I talked to the CEO of our largest partner who is Constellation Home Builders and he uses the word uncertainty. So builders were just uncertain and when there’s uncertainty, you don’t make investments, but we see it coming. We see the whole market changing right now and we think it’s going to be a pretty good fourth quarter for us.

And you’re right 12%, 12.6% SaaS growth year over year is pretty good. I think we can do better. We’ve also just launched our payables automation product into the K-twelve market. We’ve also offered another service called Capture as a Service, which is all recurring revenue as well. We just negotiate we’re in the middle of negotiating a up sell of our products to our large K-twelve partner Software Unlimited.

So a lot of good things happening. Was out in Sioux Falls, South Dakota last week negotiating that contract with the management team of Software Unlimited. So we expect a big fourth quarter out of that part of our business as well.

Howard Halpern, Analyst, Taglich Brothers: Okay. I think I recall on our last call there were I think three K-twelve utilizing iPass for that market. Has that pipeline grown or has it even gotten more live customers?

Jim DiSoccio, President and CEO, Intelenetics: Yes, we’re now up to four live customers over there, which again we launched that in March, April timeframe. So we’ve gotten four customers over there and we are just actually signed. So there’s two large partners in that space that we work with. One is Software Unlimited who’ve been partners with for five or six years selling our document management system and we’ve just launched payables automation into their customer base. And there’s another company called Skyward and Skyward has 2,300 school districts throughout the country.

And we’ve just signed our first two beta sites over there. So they’re probably a couple of weeks away from going live, but we’re also ramping up our marketing to go after that market as well. So again, already have 55 document management customers of Sky with Skyward right now, and we just sold our first two payables automation customers there. So we’re expecting some really good results on that side of the business as well.

Howard Halpern, Analyst, Taglich Brothers: Okay. And so I know you have your handful with the homebuilders and the K-twelve. But I guess can you talk about any progress being made on entering any new verticals, ERP verticals?

Jim DiSoccio, President and CEO, Intelenetics: We do have a partner manager and we’re working very diligently. We have a pipeline of partners that we’ve been working with, not ready to divulge. We did sign Springbrook up earlier in the year, but that’s going a little slower than we would like. But we are every day calling on net new partners to bring into our ecosystem.

Howard Halpern, Analyst, Taglich Brothers: Well, guys keep up the great work.

Joe Spain, Chief Financial Officer, Intelenetics: Thank you, Howard. Thanks, Howard.

Conference Operator: You. And with that, there are no further questions at this time. I’d like to turn the call back to Jim D’Soucio for closing remarks.

Jim DiSoccio, President and CEO, Intelenetics: Thank you, Julian. I would like to say very bullish on our company right now. It’s been with the tariffs out there and the uniqueness of our business with homebuilders and with K-twelve, Things are looking very, very positive for us as we go forward in the third and fourth quarter. We are ramping up. We will be back to where we were at the end of the third quarter with professional services revenue, which is very exciting as well.

And we’re just well positioned for continued success. We believe in our strong competitive position and growing markets and our diverse set of solutions with ample cross selling opportunities. And we further believe that is absolutely the right strategy to reinvest our historically strong cash flow back into the company specifically for sales and development I mean sales, 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 consistent financial results. Thank you all for joining us today.

We’ll speak again in the future. Thank you.

Conference Operator: Thank you. And with that, this does conclude today’s teleconference. We thank you for your participation. You may disconnect your lines at this time. Have a great day.

Jim DiSoccio, President and CEO, Intelenetics: Thank you.

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