Q1 2025 Intellinetics Inc Earnings Call
Speaker Change: Greetings and welcome to the Intellinetics' first quarter 2025 earnings call.
At this time, all participants are in a listen-only mode [inaudible]
A Question and Answer session will follow the form of presentation.
Speaker Change: and if anyone should require operator assistance, please press star zero on your telephone keypad.
As Reminder, this conference is being recorded.
Speaker Change: It is now my pleasure to introduce your host, Roger Grabner, Director of Marketing.
Thank you. You may begin.
Speaker Change: Thank you and good afternoon, everyone. I'm pleased to welcome you to Intellinetics 2025.
Speaker Change: 1st quarter conference call. Before we begin, I would like to remind listeners that during this conference call, comments made by management, they include forward-looking statements regarding the tone and its ink, that are not historical facts.
Speaker Change: These forward-looking statements are based on current expectations and beliefs of management.
Speaker Change: and there are subject to risk and uncertainties that could cause such statements to differ materially from actual future events or results. Intellinetics Inc undertakes no duty to update any forward-looking statements.
Speaker Change: for more information about factors that may cause actual results to differ materially from forward-looking statements.
Speaker Change: Please refer to the press release issued today as well as risk and uncertainties included in the section under the caption, risk factors and management discussion and analysis of financial conditions and results of operations.
Speaker Change: and Intellinetics annual report on form 10K are the quarterly report on form 10Q file today.
Speaker Change: Also, please 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.
Speaker Change: are not limited, are not intended to be considered an isolation or a substitute for results prepared in accordance with gap, and may be different from non-GAAP financial measures presented by other companies.
Speaker Change: A reconciliation between GEP and non-GEP measures can be found in the press release issue today.
Speaker Change: With all that said, I would like now to turn the call over to Jim DeSocio, Intellinetics President and CEO , Jim DeColiseurs.
Thank you, Rochester.
Speaker Change: or payables for the patient's solution to provide an extremely quick return on investment for our customers.
Speaker Change: 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.
Speaker Change: with you Pable's automation as a transformative opportunity for our company.
Speaker Change: and we plan to continue to make investments to position the product for as rapid and adoption as we can drive.
Speaker Change: We have more reference accounts than we ever have, and that number will grow quarterly. With our home builder, ERP partner, we close two orders in February and two in March. And with our K-12 partner, we close three more in the first quarter.
Speaker Change: 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.
Speaker Change: because we have a solution with a very rapid and identifiable payback with an identifiable market that dwarves our historic performance. Now is the time for us to invest in scaling our business as we transform into a predominantly facelift company.
Speaker Change: with the diverse growing suite of solutions for customers in the digital transformation space.
Speaker Change: We've continued in 2025 to strengthen and institutionalize our sales tools and processes.
For example, by harbing a sales engineer.
Speaker Change: Senior Pables Automation Solutions Consultant and DTS sales, all of whom have significant experience with both the solutions we offer and markets we serve.
Speaker Change: We've also made investments in IT infrastructure and controls for stock to certification, believing certification offers significant benefits, including increased customer trust and loyalty.
Speaker Change: Improve Cybersecurity Risk Medication, and create a competitive advantage over non-compliant
Speaker Change: As expected, and called out in prior communications, these investments reduce our EBITDA temporarily.
Speaker Change: 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.
Speaker Change: While our SaaS business continues to grow, our professional services business, how do we quarter?
Speaker Change: Fairholders should know that orders have already picked up this quarter. Earlier this quarter we achieved our biggest single order intake week in years.
Speaker Change: The record-breaking week for over 2.4 million of total contract value in new project contracts was driven by numerous state agencies and commercial clients.
Speaker Change: 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
Speaker Change: Dollar Deal, Total Contract Value, Multimouth Scanning Project that was sold in Q4 of 2024.
but had documents pick up delayed by the quiet.
Speaker Change: These projects, so we just started picking up that work this week. These projects will enable us to resume work at more historical levels in the coming months.
Speaker Change: Hopefully recent political events that created uncertainty in the first part of this year are moving behind us.
Speaker Change: and we will enjoy more of the tailwind our products and services ROI engender. At this time, I would like to turn to Cole over to our chief financial officer, Joseph
Thank you, Jim. Go.
Joe Spain: Thank you, Jim. I will now review our financial results for the first quarter 2025.
Speaker Change: Total revenue for the quarter and in March 31, 25 decreased 5.8% to 4.2 million as compared to 4.5 million for the same period last year.
Speaker Change: The following are the material components of our revenue presented on our statements of operations. First SaaS, including hosting revenue, grew 9.8% to 1.5 million for the quarter, from 1.4 million for the same period last year, primarily driven by continued payables automation early success.
Speaker Change: Software maintenance services were down as expected at decreasing 22,000 or 6.4% from 24.
Speaker Change: As a reminder, these maintenance revenues are from supported rooms with customers continuing on our premise solution.
Speaker Change: Professional Services revenue decreased to 13.2% to 2.2 million for the quarter from 2.5 million for the same period last year.
Jim has just discussed the timing issues driving this decrease.
Speaker Change: as a percent of total revenue, professional services revenue was 51 percent of total revenue for the quarter compared to 55 percent last year.
Speaker Change: Consolidated gross margin percent increased, 322 basis points to 67.6% for Q1 this year compared to 64.3% last year.
Speaker Change: 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.
Speaker Change: Operating expenses increased 21.1% to 3.6 million for Q1, 25 compared to 2.9 million in Q1, 24.
Speaker Change: The increase is driven by our investments in sales and marketing as well as infrastructure which is reflected in admin.
Speaker Change: Jim has discussed these already as part of our strategy to accelerate sales and enabling us to scale.
Speaker Change: Met loss for Q1 was 728,000 compared to the net loss of 175,000 for the same period last year.
Speaker Change: The primary driver here was the increased spending levels in SGNA to enable us to achieve our sales growth this year in 26 and beyond. Last per share was 17 cent per share compared to last per share of 4 cents last year.
are adjusted EBITDA for the quarter with 77,000.
Speaker Change: compared to an adjusted EBITDA of 673,000 for the same period in 24. The difference again are the same investment factors we just discussed.
Speaker Change: Next I'll turn to a brief overview of our balance sheet.
Speaker Change: and March 31, we attach of 2.1 million an accounts receivable net of 1.4 million, our total asset for 18 million, including 9.1 million and in tangible assets and goodwill as part of acquisitions made since 2020.
Speaker Change: Total Liabilities were $7.6 million, including $2.9 million in deferred revenues, reflecting science, science, and maintenance contracts, and $1.35 million in debt principle as of March
Speaker Change: Given our sales and marketing initiatives, we temporarily pause our aggressive prepayments of our debt and we will continue to assess the best views of our capital.
Speaker Change: For those watching our filings, you'll see our 4MAS-3 for its shelf registration. This won't able us to act quickly to further strengthen our biology.
Speaker Change: 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 plan to assumptions.
Speaker Change: and Subject to Risks and Uncertainties. We describe in our piling them this call. We expect no change to the guidance we just gave in March.
Speaker Change: that we will grow revenues on a year-over-year basis for fiscal 25, particularly growing SaaS revenues, and maintaining positive adjusted e-to-dot.
Speaker Change: The company expects its 25-adjusted EBITDA will be reduced by more than half compared to fiscal 24 due to the increased investments in sales and marketing intended to provide returns on those investments in late 25 and beyond.
Speaker Change: With that we thank you all for listening and at this time we'd like to open the call up to Q&A
Speaker Change: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue for participants using speaker equipment and may be necessary to pick up the handset before pressing the star keys.
Speaker Change: and our first question comes from the line of Howard Halpern with tactic brothers.
please proceed with your question
Howard Halpern: In terms of, so you talked about, I guess, seven new customers, I guess, in the first quarter.
Howard Halpern: with those being implemented over the next number of months. How many?
Howard Halpern: Implementation will you have and what would those implementations mean in terms of annual recurring revenue?
Speaker Change: Oh, so Steve, I don't have the avenue, I don't have the recurring revenue at 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 Pables Automation product.
Okay, and how is the...
Speaker Change: I don't know if the implementations are right word, but not the payables, but the other side of the equation, the purchase orders.
Speaker Change: The purchase order we released our first, we had our first release of pay goals or purchase order. Just went out and
Speaker Change: at the end of April . We've already done four or five presentations.
Speaker Change: 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 releases planned as we go forward.
Speaker Change: 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.
Speaker Change: who's been in the Pebbles Automation Space for 15 years or so, worked for SAP and some of the other big ERP players, and he gave it very, very high marks.
Speaker Change: for a look and feel and initial functionality. But again, it is a first release, and in any first release we have a development roadmap to continue to enhance that product.
Speaker Change: Okay, and I'll just ask this, but it seems like it might not.
Speaker Change: You know, 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.
Speaker Change: Well, it's actually the hesitation I would think is what's going on in the market that had to win, that the tariffs have created between the U.S. and Canada.
Speaker Change: because brakes are high in the building industry, so that's a little bit more aware of how you have their selling, so it's more from that side and having anything to do with our participation of our products.
Speaker Change: It's more about what's going on in our key demographic, which is the building industry.
Speaker Change: and with the new orders coming in professional services side, are those relatively stable to margin type of opportunities that we should model into?
Yes, most definitely. We had a dip.
Speaker Change: We always have a very, very, very big, uh...
Speaker Change: You know, I want to say seven figure deal, high six figure deal.
Speaker Change: 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're just committed for us to start that project.
So, with the 2.4 million, we sold...
Speaker Change: 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 million of work we have in our queue to perform
Speaker Change: which should really help get our numbers back to where they've been historically.
Speaker Change: Okay, and then just one last one, there's more of a, not a base business question. You have, do you still have a little, is it a little bit in excess of 600 K-12 customers that you serve?
Speaker Change: Yes, that's another part of our growth strategy for the payables automation and capture as a service solution that we offer.
So, we just watched that.
I want to say, in April , beginning of April ,
Speaker Change: We just trained our K-12 sales staff on that product.
Speaker Change: and we've already started selling into that marketplace. We sold, I think, we have 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.
Speaker Change: and with the financial department, we can send that to anybody who's interested, how great the product was and is actually done a testimonial for us and actually spoke.
at a K-12 music group for us.
Speaker Change: Counting how great the product was. So we expect a good growth on that side and one other thing
Speaker Change: We just renegotiated our contract with our K-12 partner software unlimited.
Speaker Change: that they will now be selling and representing the payables automation product as well. So a lot of good things happening on all sides with that product, Howard.
Okay, well, thanks and keep up the great work, guys.
Thank you. We're very bullish on the future.
Speaker Change: Thank you. And we have reached the end of the question and answer session. I'd like to turn the floor back to President CEO Jim DeSocio for close remarks.
Speaker Change: Thank you. As I said, Intellinetics 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.
Speaker Change: 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.
Speaker Change: We appreciate to continue support of our long-term shareholders and aim to attract new investors as well by delivering strong and consistent financial results.
Speaker Change: 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.
Speaker Change: Thank you. This does conclude today's conference and you made us connect a lot at this time. Thank you for your participation and have a great day.