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II

INTELLINETICS, INC. (INLX)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue fell 13.6% year over year to $4.01M as a sharp decline in Professional Services outweighed double‑digit SaaS growth; EBIT turned to a loss with heavier sales/marketing and IT investments to support scale .
  • Versus S&P Global consensus, INLX missed revenue (actual $4.01M vs $4.25M*) but delivered a modest EPS beat (actual $(0.13) vs $(0.16)*); miss was tied to timing of a large contract renewal that depressed scanning/conversion volumes in the quarter .
  • Management revised FY25 outlook: now expects 2025 revenue to be below 2024, while still growing SaaS and maintaining positive Adjusted EBITDA; EBITDA is expected to be “reduced by more than half” vs FY24, unchanged from Q1 .
  • Liquidity and flexibility improved: INLX prepaid all outstanding notes in June, ending Q2 with no debt and ~$2.1M cash; management highlighted improved future cash flows and a rebuilt Professional Services backlog supporting recovery in 2H25 into Q1’26 .

Values with an asterisk are retrieved from S&P Global.

What Went Well and What Went Wrong

  • What Went Well

    • SaaS momentum: SaaS revenue rose 12.6% YoY; management reiterated Payables Automation as the key multi‑year growth engine and is selectively adding headcount to accelerate growth .
    • Balance sheet de‑risked: All notes prepaid in June; CFO emphasized debt‑free status at quarter‑end and highlighted $2.1M cash and $2.6M deferred revenue underpinning future revenue visibility .
    • Contract renewal & pricing: Largest customer contract renewed June 1; management expects price increases to lift gross margins in 2H25 and noted orders “in hand” to keep production at historical levels into Q1’26 .

  • What Went Wrong

    • Professional Services slump: Pro Services revenue fell 29.0% YoY on timing of the contract renewal, driving total revenue decline and profit pressure in the quarter .
    • Margin/earnings compression: Operating income swung to a $(0.51)M loss and Adjusted EBITDA fell to $0.03M as volume headwinds and higher growth investments weighed on profitability .
    • Full‑year guidance cut: FY25 revenue now expected below FY24 given 1H weakness in Pro Services; while SaaS growth remains intact, EBITDA is guided to more than halve vs FY24 levels .

Financial Results

Revenue, earnings, and margins (oldest → newest)

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Millions)$4.64 $4.25 $4.01
Gross Profit ($USD Millions)$3.00 $2.87 $2.73
Gross Margin %64.7% 67.5% 68.0%
Operating Income (EBIT) ($USD Millions)$0.17 $(0.68) $(0.51)
EBIT Margin %3.7% (16.1%) (12.7%)
Net Income ($USD Millions)$0.08 $(0.73) $(0.57)
Net Income Margin %1.6% (17.1%) (14.2%)
Diluted EPS ($)$0.02 $(0.17) $(0.13)
Adjusted EBITDA ($USD Millions)$0.70 $0.08 $0.03

Consensus vs. actual (Q2 2025)

MetricConsensusActualSurprise
Revenue ($USD Millions)$4.25*$4.01 (5.6%)
EPS ($)$(0.16)*$(0.13) +$0.03

Values with an asterisk are retrieved from S&P Global.

Segment revenue breakdown ($USD Millions)

SegmentQ2 2024Q1 2025Q2 2025
Software as a Service$1.40 $1.54 $1.58
Software Maintenance Services$0.35 $0.34 $0.33
Professional Services$2.68 $2.16 $1.90
Storage & Retrieval$0.21 $0.21 $0.20
Total Revenue$4.64 $4.25 $4.01

KPIs and cash flow (year‑to‑date through June 30)

KPIH1 2024H1 2025
Operating Cash Flow ($USD Millions)$1.79 $0.11
Adjusted EBITDA ($USD Millions)$1.37 $0.10
Cash and Equivalents (End of Period) ($USD Millions)$1.68 $2.07

Guidance Changes

MetricPeriodPrevious Guidance (Q1 2025)Current Guidance (Q2 2025)Change
Total RevenueFY 2025Grow YoY vs 2024 < 2024 revenue Lowered
SaaS RevenueFY 2025Grow YoY Grow YoY (affirmed) Maintained
Adjusted EBITDAFY 2025>50% reduction vs FY24 >50% reduction vs FY24 (affirmed) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
Professional Services volumeQ4’24 projects pushed into 2025; Q1’25 flagged ebbs/flows and pending big renewal; orders picking up Temporary reduction tied to June 1 renewal; backlog/orders in hand to sustain historical levels through Q1’26 Improving into 2H25
SaaS/Payables AutomationQ4’24 & Q1’25: key growth pillar; added sales leadership and features; ref accounts +50% QoQ SaaS +12.6% YoY; continued hiring; targeted campaigns in K‑12 and ERP ecosystems Strengthening
Pricing/margins—Renewal includes price increases expected to lift gross margins in 2H25 Positive
Balance sheetFY24: materially delevered; cash $2.49M YE All debt prepaid in June; $2.1M cash at Q2; no debt per CFO Strengthened
Macro/end‑marketsHomebuilder tariffs/interest; K‑12 funding constraints cited previously Ongoing macro cautions; focus on ROI/time‑savings for adoption Mixed

Management Commentary

  • “Our company suffered from a temporary reduction in our professional services revenue… caused by the timing of our June 1, 2025 renewal of our contract with our largest customer… the recovery is underway now… orders in hand that will keep production at historical levels well into Q1 2026.” — James F. DeSocio, President & CEO .
  • “Despite market challenges, we have stayed laser‑focused on growing our SaaS revenues… We have added headcount to drive additional SAAS revenue growth… strategic investments are designed to drive strong sales growth in Q3, Q4, and into FY26.” — DeSocio .
  • “At June 30, ’25, we had cash of $2.1 million… total liabilities were $5.6 million… As of June 30, our balance sheet is very strong with no debt.” — CFO Joe Spain (earnings call) .
  • “We… pre‑paid, without penalty, the last of its notes payable… now is the time to invest in sales, marketing, and development.” — DeSocio (debt prepayment PR) .
  • Payables Automation and AI‑powered modules: a new customer processes 15,000+ utility invoices/month with >80% touchless within 60 days of going live, highlighting ROI and efficiency gains .

Q&A Highlights

  • Professional Services trajectory: Management reiterated the renewal timing was the main driver of Q2 softness and guided to volumes returning to historical levels by Q3 with backlog supporting into Q1’26 .
  • Profitability cadence: CFO tied the Adjusted EBITDA compression to lower Pro Services volume and increased S&M/G&A investments, with expectations of benefits in late 2025 and beyond .
  • Pipeline and verticals: Management emphasized targeted campaigns across K‑12, Payables Automation, and Digital Transformation ecosystems to accelerate SaaS growth .
  • Balance sheet strategy: Team reiterated debt‑free status and flexibility to keep investing behind SaaS growth vectors .

Estimates Context

  • Q2 2025 S&P Global consensus: revenue $4.25M* and EPS $(0.16)*; actuals were $4.01M and $(0.13), respectively — revenue miss and EPS beat. Miss was driven by Professional Services volume timing; EPS benefited from mix and cost control despite higher growth investments .
  • Given the FY25 revenue guidance cut and maintained SaaS growth/EBITDA outlook, Street models likely need to reduce FY25 revenue while keeping SaaS growth assumptions intact and EBITDA toward the lower half of “>50% down” vs FY24 .

Values with an asterisk are retrieved from S&P Global.

Key Takeaways for Investors

  • Near‑term: Expect sequential improvement as Professional Services volumes normalize in Q3 and price increases aid gross margins in 2H25; watch order conversion and production pacing as key catalysts .
  • Medium‑term: The debt‑free balance sheet provides capacity to sustain sales/marketing and product investment behind Payables Automation, which continues to show strong adoption signals and referenceability .
  • Revenue mix pivot: Durable SaaS growth (+12.6% YoY) partially offsets project‑driven volatility; sustained mix shift should dampen cyclicality over time .
  • Guidance risk now reset: FY25 revenue cut de‑risks near‑term expectations; delivery against the backlog recovery and SaaS sales funnel will drive estimate revisions and stock narrative .
  • Monitor KPIs: SaaS ARR growth, Pro Services backlog burn, Adjusted EBITDA trajectory vs higher opex, and deferred revenue trends as leading indicators .
  • Contract execution: The largest contract renewal (with pricing) provides multi‑year visibility; execution and quality metrics will be critical to sustain margins and customer satisfaction .