Intellicheck, Inc. — Q3 2023 Form 10-Q Summary
Reporting period: Three and nine months ended September 30, 2023. Intellicheck develops identity-verification solutions used in areas including retail and banking fraud prevention. Financial amounts below are in thousands of dollars unless stated otherwise.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $4,760 | $4,012 | $13,730 | $11,415 |
| Gross profit (margin) | $4,332 (91%) | $3,654 (91%) | $12,618 (92%) | $10,377 (91%) |
| Operating expenses | $5,147 | $4,378 | $15,516 | $13,667 |
| Operating loss | $(815) | $(724) | $(2,898) | $(3,290) |
| Net loss | $(644) | $(724) | $(2,737) | $(3,290) |
| Loss per share, basic and diluted | $(0.03) | $(0.04) | $(0.14) | $(0.17) |
| Adjusted EBITDA (non-GAAP) | $(271) | $75 | $(793) | $(1,313) |
Revenue growth was mainly driven by SaaS, which rose 17% in Q3 to $4,635 and 20% for the nine months to $13,526. For the nine-month period, cost of revenue was $1,112. Management attributed higher operating expenses primarily to general and administrative costs, including non-restructuring severance, headcount-related costs, and accounting and professional fees. Q3 also included $179 of interest and other income; the nine-month amount was $181.
Cash, liquidity, and debt
- At September 30, 2023, cash and cash equivalents were $3,962 and short-term investments were $4,948; combined cash and investments totaled $8,910 at amortized cost. Working capital was $8,080.
- Operating cash use was $1,114 for the first nine months, compared with $1,711 in the comparable 2022 period. Cash declined by $1,234 during the period, from $5,196 to $3,962.
- Accounts receivable rose to $3,898 from $2,637 at December 31, 2022; deferred revenue, current portion, increased to $2,153 from $906.
- No borrowings were outstanding under the $2,000 revolving credit facility, and the full $2,000 was available. The company also reported $14 remaining on an insurance-premium financing arrangement. No financial covenants apply to these facilities.
- Management expects available cash, operating cash flows, and credit availability to meet working capital and capital expenditure needs for at least 12 months from filing. It may seek additional funds for expansion or other needs, but availability and terms are not assured.
Material changes and other notable items
- Nine-month revenue increased 20%, while net loss narrowed to $2,737 from $3,290. Operating expenses increased 14%, partly offsetting gross profit growth.
- Q3 revenue increased 19%, but operating loss widened to $815 from $724 as operating expense growth exceeded gross profit growth. Net loss narrowed, aided in part by interest and other income.
- Customer concentration remained significant: three customers accounted for approximately 49% of nine-month revenue. Three of those customers plus one other represented 58% of accounts receivable at September 30.
- The company adopted the expected-credit-loss standard in 2023 and reported no material impact. It recorded an allowance for credit losses of $43 on receivables.
- Management reported no goodwill or intangible-asset impairment triggers during the period. Goodwill remained $8,102; the 2023 annual impairment test was planned for Q4.
- The company reported no material legal proceedings. It is reviewing historical state sales and use tax liabilities; the reviews could result in tax or net operating loss adjustments and additional accruals.
Outlook, risks, and controls
The filing provides no specific revenue, earnings, or cash-flow guidance. Management’s stated liquidity expectation is to fund operations and working capital for at least 12 months from filing. Forward-looking statements are subject to uncertainty, and interim results are not necessarily indicative of full-year results.
- The company holds cash deposits above FDIC insurance limits and warns that bank failure or financial-market disruption could delay access to funds or reduce available cash. It reported access to all funds at the filing date.
- Revenue and receivables are concentrated among a small number of customers; the company generally does not require collateral.
- Revenue estimates include breakage revenue for unused prepaid transactions, and actual customer usage could differ from estimates.
- A full valuation allowance is recorded against net deferred tax assets. The company reported approximately $20.8 million of NOLs at December 31, 2022, including $10.9 million expiring between 2035 and 2037.
- Management concluded that disclosure controls and internal control over financial reporting were effective as of September 30, 2023, and reported no material quarterly changes in internal control.
Important facts for investors to verify
- Whether SaaS growth continues and translates into improving operating results, given the Q3 operating loss and higher expenses.
- Cash use, receivables collection, deferred-revenue conversion, and the adequacy of liquidity over the next 12 months.
- Exposure to major customers and the effect of any customer loss or slower payment.
- Potential liabilities or NOL adjustments arising from the state sales and use tax review.
- The Q4 goodwill impairment assessment and the company’s ability to maintain access to uninsured bank deposits.