Intellicheck, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Intellicheck develops identity-verification solutions, including ID Check, for commercial retail, banking and other markets. Financial statements are unaudited.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $4.83 million | $2.70 million | $12.49 million | $7.66 million |
| Gross profit / margin | $3.32 million / 68.7% | $2.41 million / 89.1% | $9.29 million / 74.4% | $6.46 million / 84.4% |
| Operating expenses | $4.27 million | $2.38 million | $12.06 million | $7.18 million |
| Net income (loss) | $(0.95) million | $0.03 million | $(2.75) million | $(0.70) million |
| Adjusted EBITDA (non-GAAP) | $(0.27) million | $0.17 million | $(0.37) million | $(0.31) million |
- Revenue grew 79% year over year in Q3 and 63% for the nine-month period. SaaS revenue increased 32% in Q3 to $3.25 million and 46% year to date to $9.25 million. Equipment revenue also rose substantially.
- Gross margin declined as equipment sales, which carry lower margins, made up more revenue. Excluding hardware sales and related costs, management reported gross margins of 93.0% in Q3 2021 versus 92.6%, and 93.1% for the nine months versus 91.6%.
- Operating expenses rose 79% in Q3 and 68% year to date, primarily due to higher stock-based compensation, headcount, accrued incentives and marketing. Stock-based compensation was $2.27 million for the nine months, versus $0.29 million a year earlier.
- Cash provided by operating activities was $0.41 million for the nine months, compared with $0.31 million used in the prior-year period. Investing used $0.34 million; financing provided $0.08 million, versus $10.18 million in the prior year, which included public-offering proceeds.
Financial position and liquidity
- At September 30, 2021, cash was $13.27 million, working capital was $12.86 million, total assets were $25.86 million and stockholders’ equity was $21.80 million.
- Total liabilities were $4.06 million. The company reported no borrowings under its revolving credit facility and $2.00 million of stated unused availability. No material funded debt balance was reported.
- Management expects cash, operating cash generation and available credit to meet working-capital and capital-expenditure needs for at least 12 months from the filing date. It may seek additional capital for expansion or other business needs; access and terms are not assured.
Changes, outlook and risks
- The company completed 21 customer implementations in the first nine months of 2021. Two customers represented approximately 60% of Q3 revenue and 58% of nine-month revenue; those customers accounted for 28% of accounts receivable at quarter-end.
- Management attributed growth to higher commercial SaaS revenue and equipment sales. It provided no specific revenue or earnings guidance in the filing.
- COVID-19 had previously caused a temporary decline in customer revenue. The company reported SaaS growth but said it could not predict further effects, including those from variants, restrictions, customer spending and vaccination developments. Remote work and reduced travel or events could also affect sales, implementation and productivity.
- Unusual item: the SBA returned a $10,000 EIDL advance in February 2021 following legislative relief; the company recognized the amount as other income. The nine-month results also reflect a full valuation allowance against net deferred tax assets.
- The company reported no material legal or regulatory proceedings. Management concluded disclosure controls were effective and reported no material third-quarter change in internal control over financial reporting.
Key facts for investors to verify
- Whether SaaS growth continues and whether equipment sales’ lower margins keep reported gross margin below the company’s software-oriented margins.
- How operating expenses, particularly stock-based compensation and hiring-related costs, affect the path to profitability and cash generation.
- Customer concentration, contract renewals, receivables collection and the conversion of deferred revenue into recognized revenue.
- Cash runway and credit-facility availability, alongside any future capital raising or dilution; management’s 12-month liquidity assessment depends on expected operating resources.
- Potential COVID-19 effects and goodwill impairment indicators; management planned its annual goodwill impairment test for the fourth quarter of 2021.