Intellicheck, Inc. — Q1 2023 Form 10-Q
Business and period: Intellicheck develops identity-verification solutions used across industries, including retail and banking fraud prevention. This unaudited report covers the three months ended March 31, 2023; comparisons are to Q1 2022. Dollar amounts below are in millions unless otherwise stated.
Key financial results
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | $4.254 | $3.395 | +25% |
| Gross profit / margin | $3.922 / 92% | $3.079 / 91% | +27%; margin +1 percentage point |
| Operating expenses | $5.232 | $4.547 | +15% |
| Operating loss | $(1.310) | $(1.468) | Loss narrowed |
| Net loss | $(1.316) | $(1.468) | Loss narrowed; per-share loss $(0.07) vs. $(0.08) |
| Adjusted EBITDA, non-GAAP | $(0.558) | $(0.807) | Loss narrowed |
| Cash from (used in) operations | $0.233 | $(2.397) | Improved |
Liquidity, debt and balance sheet
- At March 31, 2023, cash and cash equivalents were $5.355 million and short-term U.S. Treasury investments were $4.881 million, totaling $10.236 million at amortized cost. Working capital was $8.752 million.
- Total assets were $23.595 million, total liabilities $5.765 million and stockholders’ equity $17.830 million. The company had an accumulated deficit of $132.064 million.
- No borrowings were outstanding under the $2.0 million revolving credit facility; the full $2.0 million was available. A separate insurance-premium financing arrangement had $42,000 remaining at quarter-end.
- Deferred revenue, current portion, increased to $2.027 million from $0.906 million at year-end 2022. Accounts receivable rose to $3.527 million from $2.637 million.
- Cash increased by $159,000 during the quarter. Investing activities used $17,000 and financing activities used $57,000.
Material changes and management commentary
- SaaS revenue grew 26% to $4.228 million and accounted for nearly all revenue growth. Management attributed improved gross margin to a higher SaaS mix and improved cloud-cost structure.
- Operating expenses rose 15%, primarily due to higher headcount-related general and administrative costs and accounting and professional fees. Research and development expense declined to $1.308 million from $1.604 million.
- Management expects available cash, anticipated operating cash flows and the revolver to meet working-capital and capital-expenditure needs for at least 12 months from the filing date. It also said it may seek additional financing for growth or other business needs; availability and terms are not assured. No quantified revenue or earnings guidance was provided.
- Three customers represented approximately 39% of Q1 2023 revenue and 54% of accounts receivable at quarter-end, creating customer-concentration exposure.
- Management reported internal control over financial reporting was ineffective because of a material weakness in controls over accounting for shares held to settle tax liabilities. A remediation plan is underway; management said the weakness would be considered remediated only after testing confirms the controls operate effectively.
- The company reported that cash deposits exceed FDIC insurance limits and warned that bank failures or disruptions could impair access to funds. It stated it had full access to its funds at the reporting date.
- The company reported no material legal proceedings. Adoption of the expected-credit-loss standard had no material financial-statement impact. No goodwill or intangible-asset impairment was recorded in the quarter.
Important facts for investors to verify
- Whether SaaS growth continues and whether deferred-revenue growth converts into recognized revenue and operating cash flow.
- Progress in remediating the material weakness, including evidence that the revised controls are operating effectively.
- Customer concentration, collections and the rise in receivables; three customers accounted for 54% of quarter-end receivables.
- Cash availability and exposure to uninsured bank deposits, alongside the company’s stated 12-month liquidity expectation.
- Potential dilution: common shares outstanding increased to 19,215,863 at quarter-end from 18,957,366 at year-end 2022; the filing reports 912,410 shares available for future equity-plan grants.