Intellinetics - Q4 2025

Transcript

Operator (participant)

Good evening, and welcome to the Intellinetics fourth quarter and full year 2025 earnings conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. You may be placed in the question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Roger Grabner, Director of Marketing. Please go ahead, Roger.

Roger Grabner (Director of Marketing)

Thank you. Fourth 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 Intellinetics, 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. Intellinetics, 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 Intellinetics annual report on Form 10-K filed earlier today.

Also, please note that on the call today, management will discuss the non-GAAP financial measures of 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 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 to now turn the call over to Alison Forsythe, Intellinetics President and CEO. Alison, the call is yours.

Alison Forsythe (President and CEO)

Thanks, Roger. Good afternoon, everyone, and thank you for joining us. Since stepping into the CEO role in mid-February, I've spent my time getting close to the business, meeting with the team, reviewing our operations, and assessing our opportunities and where we need to improve execution. What I see is a company with strong foundational assets, an established SaaS customer base, differentiated technology, and meaningful opportunities in vertical markets where secure document and workflow automation remain critical. In 2025, under the leadership of my predecessor, the company continued to grow SaaS revenue while also strengthening our document management business, including securing an important contractual win with our largest customer. While total revenue reflects variability in professional services activity, SaaS continued to grow and represents an increasing share of our overall business.

Our software platform is the core of the business and the primary driver of growth and long-term value creation. Looking ahead, we are focused on improving execution, sharpening our go-to-market approach, and accelerating SaaS revenue while bringing greater consistency to our document management business. Now turning to results. For the fourth quarter, total revenue increased modestly year over year, driven by continued SaaS growth that more than offset a slight decline in professional services. Gross margin improved as the mix of software revenue continued to increase. For the full year, revenue declined compared with 2024, primarily reflecting variability in services activity earlier in the year. Despite that, SaaS revenue grew at a double-digit rate and continues to represent an increasing share of the overall business.

Adjusted EBITDA declined year-over-year, reflecting both the revenue mix shift and investments we've been making in sales, marketing, and infrastructure to support future growth. 2025 reflected continued SaaS growth and an improving revenue mix while also highlighting clear opportunities to strengthen execution. With that, I'll turn it over to Joe to walk through the financials in more detail.

Joe Spain (CFO)

Thanks, Alison. Diving right into Q4, total revenue for the quarter increased a net 1% to $4.3 million, with growth in SaaS revenues covering decreases from other revenue lines. Our revenue consists of the following components presented on our statements of operations. First, SaaS, including hosting revenue, increased 8.4% to $1.6 million for the quarter from $1.5 million for the same period last year. Software maintenance services were down 11.2% from 2024, reporting approximately $0.3 million in both periods. As a reminder, these revenues are from support agreements with customers continuing on our legacy premise solution. Price increases have historically offset attrition but did not cover attrition this quarter.

Professional services revenue in the quarter was down 1.8%, resulting in revenue of approximately $2.2 million for the quarter each year. As a percentage of total revenue, professional services revenue was 51% of the total for the quarter, down from 52% last year. This revenue line has not recovered to a level we expected following the June 2025 renewal of our largest customer contract. Consolidated gross margin increased 184 basis points to 66.6% for Q4 compared to 64.8% last year. The increase was driven by both better revenue mix, meaning from a greater proportion of higher margin SaaS revenue, as well as positive impact from price increases. Our margins have remained strong for each revenue line.

Operating expenses increased 11.2% to $3.1 million for Q4 2025 compared to $2.8 million for Q4 2024. The increase is driven by, one, our investments in sales and marketing as part of our strategy to accelerate sales, and two, general administrative expense, primarily our infrastructure and engineering development expansion. Net loss for Q4 was $208,000 compared to net loss of $54,000 for the same period last year, as our revenue and margin improvements were offset by increased SG&A expenses. Net loss per share was $0.05 for basic and diluted in 2025 compared to net loss of $0.01 for basic and diluted share last year. Adjusted EBITDA for the quarter was $261,000 compared to an adjusted EBITDA of $531,000 for the same period last year.

Briefly recapping the full year, total revenue 2025 decreased 8% to $16.6 million as compared to $18 million last year. SaaS revenue increased 11.1%, overcoming economic headwinds in vertical markets such as construction and home building and K-12 education. Professional services revenue decreased 18.7% against the record year of 2024, ending at $8.1 million compared to $10 million last year. Consolidated gross margin was 66% compared to 63% last year. Same as within Q4, we maintained our strong margins by revenue line for the full year results. A favorable mix shift drove the consolidated increase. Operating expenses increased 10.4% to $12.7 million for 2025 compared to $11.5 million in 2024. This increase is driven by two primary factors, same as the quarter.

First, sales and marketing, primarily driven by the expansion of our team in 2025 and also upgrading our website and customer relationship management tools. Second, general and admin expense increased 8.5% from expanded security and controls investments, as well as expanding our engineering development team. The full year net loss was $1.873 million compared to net loss of $546,000 last year. The net loss per basic and diluted share was $0.44 compared to net loss per basic and diluted share of $0.13. For adjusted EBITDA, 2025 was $470,000 compared to an adjusted EBITDA of $2.4 million for 2024. Here, our investments in 2025, made in order to grow and scale the business, coincided with the reduction in professional services due to extended low scanning project volume.

Next, I'll turn to a brief review of our balance sheet. At December 31, 2025, we had cash of $2.5 million and accounts receivable net of $1.2 million. Our total assets were $17.3 million, including $8.7 million in intangible assets and goodwill as part of acquisitions made since 2020. Total liabilities were $5.9 million, including $3.4 million in deferred revenues, reflecting signed SaaS and maintenance contracts, and $1.7 million in lease liabilities. We've had no debt on the balance sheet since we paid the last of it in June 2025. 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 SaaS revenues on a year-over-year basis for fiscal year 2026. Now back to Alison for some remarks before opening the line.

Alison Forsythe (President and CEO)

Thanks, Joe. Before we open it up for questions, I'll just leave you with a few closing thoughts. Intellinetics has a strong foundational assets, a growing SaaS business, differentiated technology, and attractive vertical markets. Our focus now is execution, sharpening our go-to-market approach, and accelerating SaaS growth while bringing greater consistency to our document management business. We believe this positions the company for more consistent performance and long-term value creation. With that, operator, we'll open the line for questions.

Operator (participant)

Thank you. We'll now be conducting a question and answer session. If you'd like to be placed in the question queue, 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 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star one. One moment, please, while we pull for questions, and that's star one to be placed in the question queue. We've reached the end of our question and answer session. Ladies and gentlemen, that does conclude today's teleconference and webcast. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation.