Release Date: May 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Intellinetics Inc (INLX, Financial) reported a 7.7% increase in total revenue for Q1 2024 compared to the same period last year, reaching $4.5 million.
- SaaS revenue continues to grow, with DaaS revenue increasing by 13.5% and now constituting 31% of consolidated revenue, up from 29% last year.
- The company has successfully expanded its K-12 operations to 597 districts, significantly increasing its presence and potential for cross-selling additional services.
- Intellinetics Inc (INLX) has seen strong customer response and rapid growth in its new SaaS offering, IPS, with nine customers already fully paid, indicating high product satisfaction.
- The company's strategic focus on SaaS offerings is expected to reduce earnings volatility and create a more predictable and scalable business model.
Negative Points
- Net loss for Q1 2024 was $175,000, a decrease from a net income of $113,000 in the same period last year, primarily due to increased operating expenses.
- Operating expenses increased by 24.2% due to investments in structure and scale, impacting profitability in the short term.
- The document conversion segment faces potential revenue reduction due to a major customer relocating tasks, which could impact overall revenue.
- There is uncertainty in negotiations with a major customer regarding contract terms, which could affect future revenue from the document conversion business.
- Despite revenue growth, adjusted EBITDA guidance for 2024 has been revised to be at or slightly less than 2023 levels, indicating potential challenges in maintaining profitability.
Q & A Highlights
Q: Congratulations on Q1 results guys. Again, in terms of the total number of sales reps, you said you added one. How many do you have and are they structured in a way where you're developing an IPS team or are they integrated with the K through 12 operation, right?
A: (James DeSocio - President, Chief Executive Officer, Director) We have five direct sales reps and our management team, our sales reps carry quotas. We hired the new sales rep into our IPS team. We'll handle finding new partners to resell our iPass product through and also reselling to our K-12 customer base where our other two sales reps, one being the executive in charge of that, are selling. I pass to our one of our existing partners, and that's where the great successes come from.
Q: Okay. And is the implementation process going to be simpler for the K-12 than it is for the larger customer of Constellation's customers?
A: (James DeSocio - President, Chief Executive Officer, Director) We believe so. We just inked our first beta site customer out of our K-12 customer base, and it's going to be a little bit different to start, not as complex as some of our commercial businesses that are using the product. K-12 is a little bit more straightforward. So we think it will be simpler.
Q: And is that why some of the incremental spend that you have is on a support or implementation type of people?
A: (James DeSocio - President, Chief Executive Officer, Director) Exactly. We're a little concerned that we oversell the product. We don't have the support staff to get it up and running as quickly as we'd like. So we're investing in the support staff as well.
Q: And you anticipate if you were to sign eight or nine new contracts, do you think from the commercial side, you think you could get them up and were all up and running before the end of the year?
A: (James DeSocio - President, Chief Executive Officer, Director) It depends on when we sign them. If we sign them in the next couple of weeks. Most definitely we're looking at a probably a conservatively a 60 day implementation and change and not us that slows it down. It's usually they have to get their systems ready. We need to do integration into their systems. So there's there were a couple of things out of our control, but we've been very successful once signed getting people up pretty consistently in 60 to 90 days.
Q: Okay. And one last one. We should see incremental increases in G&A expense from that 1.8 level if you take out the one-time stock compensation expense?
A: (Joseph Spain - Chief Financial Officer, Treasurer) Yes, yes, we historically that's what I gave you.
Q: Okay. Okay. Okay. Thanks, guys, and keep up the great work.
A: (James DeSocio - President, Chief Executive Officer, Director) Thank you, Henry, on going forward, any questions on, please feel free to contact us directly or Joe or myself or you can contact Tom Baumann at FNK. IR. And we'll be happy to have a conversation and answer any additional questions that you might have.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
