Intellicheck, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual filing, not a standalone fourth-quarter report. Intellicheck develops identity-verification software and related services, primarily delivered through SaaS subscriptions and per-scan or fixed-fee arrangements.
Financial performance and liquidity
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $10.735 million | $7.664 million |
| Gross profit / margin | $9.309 million / 86.7% | $6.668 million / 87.0% |
| Operating expenses | $9.568 million | $9.316 million |
| Operating income (loss) | $(0.260) million | $(2.648) million |
| Net income (loss) | $0.558 million | $(2.549) million |
| Adjusted EBITDA, non-GAAP | $0.329 million | $(1.813) million |
| Cash from operating activities | $(0.019) million | $(1.841) million |
- Revenue grew 40%; SaaS revenue increased 54% to $9.373 million and represented most reported revenue. Equipment revenue also rose to $1.045 million from $0.480 million.
- Gross margin eased slightly, which management attributed primarily to increased lower-margin hardware sales, partly offset by SaaS growth. Operating expenses rose 3%, including higher personnel costs and accrued incentive compensation.
- 2020 net income included a $796,100 gain from forgiveness of a Paycheck Protection Program loan. The company still reported an operating loss; Adjusted EBITDA was positive after removing the forgiveness gain and other specified items.
- Cash was $13.121 million at year-end, versus $3.351 million a year earlier; working capital was $13.462 million. Total assets were $24.340 million, total liabilities $2.129 million, and stockholders’ equity $22.211 million.
- Financing activities provided $10.205 million, primarily reflecting approximately $10.570 million of net proceeds from a June 2020 public stock offering. Investing activities used $0.416 million, including a $400,000 software-license purchase.
- No revolver borrowings were outstanding at year-end; the company reported $2 million of availability under its Citibank facility. Management expected available cash, operating cash flows and facility availability to cover anticipated needs for at least 12 months after filing. No formal revenue or earnings guidance was provided.
Changes, outlook and notable items
- The company moved from a 2019 net loss to 2020 net income, while substantially reducing its operating loss. Revenue growth was driven primarily by commercial SaaS subscriptions.
- The PPP note was forgiven in November 2020 and the related gain was recorded in earnings. The $10,000 EIDL advance was repaid in December; the SBA later returned the advance and interest in February 2021 following legislative relief.
- COVID-19 disrupted operations and may continue to affect customers, sales cycles and demand. Management said the future impact could not be reliably predicted.
- Customer concentration increased: the top ten customers represented about 75% of revenue, versus 66% in 2019; two customers accounted for 41% of 2020 revenue. Those two customers represented 52% of year-end receivables.
- Other risks include long sales and implementation cycles, intense competition, reliance on government reference data and a limited supplier base, cybersecurity and privacy exposure, product errors, and the risk of future operating losses. Goodwill was $8.102 million; no impairment was recorded, but the auditor identified the goodwill valuation as a critical audit matter because it relied on significant forecasts and valuation assumptions.
- Management reported effective disclosure controls and internal control over financial reporting. The independent auditor issued an unqualified opinion on the financial statements but did not express an opinion on internal-control effectiveness.
Important facts for investors to verify
- How much of revenue growth is recurring SaaS expansion, and whether customer concentration is changing.
- Whether the company can sustain positive operating cash flow and achieve operating profitability without one-time gains or further equity issuance.
- The assumptions supporting the $8.102 million goodwill balance, especially projected growth, margins and discount rates.
- The actual effects of COVID-related disruption, customer spending decisions and lengthy sales cycles on future results.
- Availability and terms of the undrawn credit facility, and the potential dilution from equity awards or future capital raises.