Intellinetics, Inc. Reports Second Quarter and Six Month Results

COLUMBUS, UNITED STATES


Record Quarterly Software as a Service and Overall Revenues;
Revenues Increase 58%; Earnings per share of $0.07

COLUMBUS, OH, Aug. 16, 2021 (GLOBE NEWSWIRE) -- Intellinetics, Inc. (OTCQB: INLX), a cloud-based document solutions provider, announced financial results for the three and six months ended June 30, 2021.

2021 Second Quarter Financial Highlights

        ●     Total Revenues increased 58% from the same period in 2020.
        ●     Software as a Service Revenues increased 51% from the same period in 2020.
        ●     Net Income of $192,447, compared to Net Loss of $282,356 from the same period in 2020.
        ●     Adjusted EBITDA of $437,509, compared to $59,374 from the same period in 2020.
        ●     Net income per basic share of $0.07, compared to $(0.10) from the same period in 2020.

2021 Six Month Financial Highlights

        ●     Total Revenues increased 82% from the same period in 2020.
        ●     Software as a Service Revenues increased 47% from the same period in 2020.
        ●     Net Income of $1,035,219, compared to Net Loss of $928,567 from the same period in 2020.
        ●     Adjusted EBITDA of $793,674, compared to $67,159 from the same period in 2020.

Summary – 2021 Second Quarter Results

Revenues for the three months ended June 30, 2021 were $2,909,646 as compared with $1,836,182 for the same period in 2020. This constituted a record in our quarterly overall revenues as well as a record in our quarterly Software as a Service revenues. The increase in our professional services and storage and retrieval revenues is primarily due to the impact of last year’s COVID-19 stay-at-home on our 2020 revenues. Intellinetics reported a net income of $192,447 for the three months ended June 30, 2021 compared to a net loss of $282,356 for the same period in 2020. The improved net income was the result of improved operating results, driven primarily by our record revenue quarter, as well as no significant transaction costs in 2021. Net income per basic and diluted share was $0.07 and $0.06, respectively, for the three months ended June 30, 2021, compared to net loss per basic and diluted share was ($0.10) for the three months ended June 30, 2020.

Summary – 2021 Six Month Results

Revenues for the six months ended June 30, 2021 were $5,544,865 as compared with $3,049,846 for the same period in 2020. The increase in our professional services and storage and retrieval revenues is primarily due to the inclusion of a full six months of revenues from our Graphic Sciences, Inc. subsidiary acquired in 2020, compared to the same period in 2020 that only included approximately four months of revenues from that business. Intellinetics reported a net income of $1,035,219 for the six months ended June 30, 2021 compared to a net loss of $928,567 for the same period in 2020. The improved net income was the result of improved operating results, no significant transaction costs in 2021, and a gain on extinguishment of debt of $845,083 from the full forgiveness of our PPP loan. Net income per basic and diluted share was $0.37 and $0.33, respectively, for the six months ended June 30, 2021, compared to net loss per basic and diluted share was ($0.46) for the six months ended June 30, 2020.

2021 Other Highlights

        ●     Cash flow enhanced by $587,120 net cash provided by operating activities for the six months ended June 30, 2021.
        ●     Invested in new warehouse to support growth of our storage and retrieval services, which increases box storage capacity more than 120%, and began consolidation of warehouses for more logistics efficiency.
        ●     Expanded K-12 footprint closing 32 new districts in the six months ended June 30, 2021, taking us to about 250 school districts at the time of this release.

James F. DeSocio, President & CEO of Intellinetics, stated, “I am excited to share that our Graphic Sciences subsidiary had a record revenue month in June 2021, which contributed to our consolidated company recording record revenues for the second quarter 2021. Additionally, our Software as a Service revenues continue to grow. In order to continue our momentum, we’ve hired a new marketing director to continue to expand our efforts with SEO and direct marketing lead generation, and we’re investing in increasing our sales team this year.

The results of our integration efforts of the 2020 acquisitions have exceeded my expectations. That said, we still have more opportunity for cross-selling, which we are pursuing. Each sales representative has a cross-selling target and is focused on customer penetration and expansion. We’ve already expanding our production capabilities to meet the growing sales demand. I continue to be bullish for our future.

“We continue to expect, for this fiscal year, to build on the positive Adjusted EBITDA of 2020 and to drive revenue growth.”

About Intellinetics, Inc.

Intellinetics, Inc., located in Columbus, Ohio, is a cloud-based document services software provider. Its IntelliCloud suite of solutions serve a mission-critical role for organizations in highly regulated, risk and compliance-intensive markets in Healthcare, K-12, Public Safety, Public Sector, Risk Management, Financial Services and beyond. IntelliCloud solutions make content secure, compliant, and process-ready to drive innovation, efficiencies and growth. Through its Image Technology Group and production scanning department, hundreds of millions of images have been converted from paper to digital, paper to microfilm, and microfiche to microfilm for business and federal, county, and municipal governments. Its operations in Madison Heights, Michigan, also provides its clients with long-term paper and microfilm storage and retrieval options. 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 growth, future revenues, including 2021 revenues and future revenue streams from new and existing customers and from Software as a Service sales, 2021 Adjusted EBITDA, cross-selling opportunities, the ability of our production capabilities to meet growing demand, future cash flow and other synergies associated with our 2020 acquisitions of Graphic Sciences and CEO Imaging and the success of our integration efforts, our other product and service offerings and marketing initiatives mentioned in this release, and in any other industry, market, initiative, service or innovation; cross-selling opportunities for Intellinetics’ future revenues, revenue consistency, growth and long-term value, including trends in revenue growth and mix; growth of software as a service, professional services, and maintenance revenue; market penetration; execution of Intellinetics’ business plan, strategy, direction and focus; 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, the impact of COVID-19 and related governmental actions and orders on customers, suppliers, employees and the economy and our industry, Intellinetics’ ability to execute on its business plan and strategy, customary risks attendant to acquisitions, trends in the products markets, variations in Intellinetics’ cash flow or adequacy of capital resources, market acceptance risks, the success of Intellinetics’ solutions providers, including human services, health care, and education, technical development risks, and other risks, uncertainties and other factors discussed from time to time in its reports filed with or furnished to the Securities and Exchange Commission, including in Intellinetics’ most recent annual report on Form 10-K as well as subsequently filed reports on Form 8-K. 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 Income/(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, stock-based compensation, note conversion and note or equity offer warrant or stock expense, gain or loss on debt extinguishment, change in fair value of contingent consideration, and significant transaction costs.

Reconciliation of Net Income/(Loss) to Adjusted EBITDA

  For the Three Months Ended June 30, 
  2021  2020 
Net income (loss) - GAAP $192,447  $(282,356)
Interest expense, net  113,271   116,796 
Depreciation and amortization  101,432   85,751 
Stock-based compensation  23,098   7,110 
Significant transaction costs  -   131,073 
Change in fair value of earnout liabilities  7,261   - 
Adjusted EBITDA $437,509  $59,374 


  For the Six Months Ended June 30, 
  2021  2020 
Net income (loss) - GAAP $1,035,219  $(928,567)
Interest expense, net  226,315   407,226 
Depreciation and amortization  196,316   114,842 
Stock-based compensation  103,696   76,183 
Stock and warrant issue expense  -   377,761 
Significant transaction costs  -   495,440 
Change in fair value of earnout liabilities  77,211   - 
Income tax benefit, net  -   (188,300)
Gain on extinguishment of debt  (845,083)  (287,426)
Adjusted EBITDA $793,674  $67,159 


INTELLINETICS, INC. and SUBSIDIARY

Condensed Consolidated Statements of Operations
(Unaudited)

  For the Three Months Ended June 30,  For the Six Months Ended June 30, 
  2021  2020  2021  2020 
             
Revenues:                
Sale of software $5,598  $9,674  $15,192  $103,774 
Software as a service  376,154   248,693   699,880   474,687 
Software maintenance services  335,073   314,111   675,519   575,354 
Professional services  1,897,780   1,045,679   3,550,243   1,605,709 
Storage and retrieval services  295,041   218,025   604,031   290,322 
Total revenues  2,909,646   1,836,182   5,544,865   3,049,846 
                 
Cost of revenues:                
Sale of software  2,122   5,357   6,359   43,659 
Software as a service  91,781   71,281   168,121   143,796 
Software maintenance services  22,272   31,569   46,660   78,085 
Professional services  861,267   514,036   1,695,505   811,132 
Storage and retrieval services  118,137   42,546   209,249   56,537 
Total cost of revenues  1,095,579   664,789   2,125,894   1,133,209 
                 
Gross profit  1,814,067   1,171,393   3,418,971   1,916,637 
                 
Operating expenses:                
General and administrative  1,058,061   844,657   2,097,087   1,688,860 
Change in fair value of earnout liabilities  7,261   -   77,211   - 
Significant transaction costs  -   175,673   -   636,440 
Sales and marketing  341,595   229,873   631,906   473,562 
Depreciation and amortization  101,432   86,750   196,316   114,842 
                 
Total operating expenses  1,508,349   1,336,953   3,002,520   2,913,704 
                 
Income (loss) from operations  305,718   (165,560)  416,451   (997,067)
                 
Other income (expense)                
Gain on extinguishment of debt  -   -   845,083   287,426 
Interest expense, net  (113,271)  (116,796)  (226,315)  (407,226)
                 
Total other income (expense)  (113,271)  (116,796)  618,768   (119,800)
                 
Income (loss) before income taxes  192,447   (282,356)  1,035,219   (1,116,867)
                 
Income tax benefit  -   -   -   188,300 
                 
Net income (loss) $192,447  $(282,356) $1,035,219  $(928,567)
                 
Basic and diluted net income (loss) per share: $0.07  $(0.10) $0.37  $(0.46)
Diluted net income (loss) per share: $0.06  $(0.10) $0.33  $(0.46)
                 
Weighted average number of common shares outstanding - basic and diluted  2,823,072   2,810,865   2,822,870   1,998,356 
Weighted average number of common shares outstanding - diluted  3,104,334   2,810,865   3,105,602   1,998,356 


INTELLINETICS, INC. and SUBSIDIARY
Condensed Consolidated Balance Sheets

  (unaudited)    
  June 30,  December 31, 
  2021  2020 
ASSETS        
         
Current assets:        
Cash $1,140,631  $1,907,882 
Accounts receivable, net  1,001,625   792,380 
Accounts receivable, unbilled  512,075   523,522 
Parts and supplies, net  60,922   79,784 
Prepaid expenses and other current assets  252,661   162,166 
Total current assets  2,967,914   3,465,734 
         
Property and equipment, net  1,010,312   698,752 
Right of use assets  3,832,916   2,641,005 
Intangible assets, net  1,076,733   1,184,971 
Goodwill  2,322,887   2,322,887 
Other assets  27,284   31,284 
Total assets $11,238,046  $10,344,633 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
         
Current liabilities:        
Accounts payable $163,869  $141,823 
Accrued compensation  458,567   271,889 
Accrued expenses, other  152,370   131,685 
Lease liabilities - current  606,350   518,531 
Deferred revenues  942,947   996,131 
Deferred compensation  100,828   100,828 
Earnout liabilities - current  923,109   877,522 
Accrued interest payable - current  -   5,941 
Notes payable - current  -   580,638 
Notes payable - related party - current  -   - 
Total current liabilities  3,348,040   3,624,988 
         
Long-term liabilities:        
Notes payable - net of current portion  1,649,324   1,802,184 
Lease liabilities - net of current portion  3,304,366   2,196,951 
Earnout liabilities - net of current portion  643,369   1,566,478 
Total long-term liabilities  5,597,059   5,565,613 
Total liabilities  8,945,099   9,190,601 
         
Stockholders’ equity:        
Common stock, $0.001 par value, 25,000,000 shares authorized; 2,823,072 and 2,810,865 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively  2,823   2,811 
Additional paid-in capital  24,251,172   24,147,488 
Accumulated deficit  (21,961,048)  (22,996,267)
Total stockholders’ equity  2,292,947   1,154,032 
Total liabilities and stockholders’ equity $11,238,046  $10,344,633 


INTELLINETICS, INC. and SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
(Unaudited)

  For the Six Months Ended June 30, 
  2021  2020 
       
Cash flows from operating activities:        
Net income/loss $1,035,219  $(928,567)
Adjustments to reconcile net income/loss to net cash used in operating activities:        
Depreciation and amortization  196,316   114,842 
Bad debt expense  (11,453)  44,705 
Loss on disposal of fixed assets  0   - 
Parts and supplies reserve change  9,000   6,000 
Amortization of deferred financing costs  51,869   65,222 
Amortization of beneficial conversion option  -   11,786 
Amortization of debt discount  53,333   35,555 
Amortization of right of use asset  292,051   160,290 
Stock issued for services  57,500   57,500 
Stock options compensation  46,196   18,683 
Note conversion stock issue expense  -   141,000 
Warrant issue expense  -   236,761 
Interest on converted debt  -   176,105 
Amortization of original issue discount on notes  -   18,296 
Gain on extinguishment of debt  (845,083)  (287,426)
Change in fair value of earnout liabilities  77,211   - 
Changes in operating assets and liabilities:        
Accounts receivable  (197,792)  804,874 
Accounts receivable, unbilled  11,447   (150,846)
Parts and supplies  9,862   1,676 
Prepaid expenses and other current assets  (86,495)  (53,400)
Right of use assets  (1,483,962)  - 
Accounts payable and accrued expenses  229,409   (399,261)
Lease liabilities, current and long-term  1,195,234   (154,257)
Deferred compensation  -   (16,338)
Accrued interest, current and long-term  442   2,236 
Deferred revenues  (53,184)  (37,723)
Total adjustments  (448,099)  796,280 
Net cash provided by/(used in) operating activities  587,120   (132,287)
         
Cash flows from investing activities:        
Cash paid to acquire business, net of cash acquired  -   (4,017,816)
Purchases of property and equipment  (399,638)  (21,927)
Net cash used in investing activities  (399,638)  (4,039,743)
         
Cash flows from financing activities:        
Payment of earnout liabilities  (954,733)  - 
Proceeds from issuance of common stock  -   3,167,500 
Offering costs paid on issuance of common stock  -   (307,867)
Payment of deferred financing costs  -   (175,924)
Proceeds from notes payable  -   3,008,700 
Repayment of notes payable - related parties  -   (47,728)
Net cash provided by financing activities  (954,733)  5,644,681 
         
Net increase in cash  (767,251)  1,472,651 
Cash - beginning of period  1,907,882   404,165 
Cash - end of period $1,140,631  $1,876,816 
         
Supplemental disclosure of cash flow information:        
Cash paid during the period for interest $121,339  $85,949 
Cash paid during the period for income taxes $2,088  $- 
         
Supplemental disclosure of non-cash financing activities:        
Accrued interest notes payable converted to equity $-  $796,074 
Accrued interest notes payable related parties converted to equity  -   238,883 
Discount on notes payable for beneficial conversion feature  -   320,000 
Discount on notes payable for warrants  -   135,292 
Notes payable converted to equity  -   3,421,063 
Notes payable converted to equity - related parties  -   1,465,515 
Right-of-use asset obtained in exchange for operating lease liability  1,483,962   - 
         
Supplemental disclosure of non-cash investing activities relating to business acquisitions:        
Cash $-  $17,269 
Accounts receivable  -   1,122,737 
Accounts receivable, unbilled  -   276,023 
Parts and supplies  -   91,396 
Prepaid expenses  -   73,116 
Other current assets  -   5,954 
Right of use assets  -   2,885,618 
Property and equipment  -   735,885 
Intangible assets  -   1,361,000 
Accounts payable  -   (169,289)
Accrued expenses  -   (163,168)
Lease liabilities  -   (2,947,684)
Federal and state taxes payable  -   (168,900)
Deferred revenues  -   (195,448)
Deferred tax liabilities, net  -   (149,900)
Net assets acquired in acquisition  -   2,774,609 
Total goodwill acquired in acquisition  -   2,319,676 
Total purchase price of acquisition  -   5,094,285 
Purchase price of business acquisition financed with earnout liability  -   (889,200)
Purchase price of business acquisition financed with installment payments  -   (170,000)
Cash used in business acquisition $-  $4,035,085