Intellicheck, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; filed May 12, 2021. Intellicheck develops identity-verification technology, including ID Check, for fraud prevention across commercial, retail, banking, and other markets.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue | $2.86 million | $3.12 million; down 8% |
| Gross profit / margin | $2.64 million / 92.3% | $2.42 million / 77.8% |
| Operating expenses | $3.72 million | $2.40 million; up 55% |
| Operating income (loss) | $(1.08) million | $24,534 |
| Net income (loss) | $(1.06) million; $(0.06) per diluted share | $26,602; $0.00 per diluted share |
| Adjusted EBITDA (non-GAAP) | $(51,777) | $144,371 |
| Operating cash flow | $(471,401) | $(460,657) |
SaaS revenue rose 24% to $2.78 million from $2.24 million. Total revenue fell primarily because Q1 2020 included approximately $784,000 of one-time hardware orders; equipment revenue declined to $36,266 from $783,793. The higher gross margin primarily reflects the prior-year period’s unusually large, lower-margin hardware sales.
Operating expense growth reflected higher stock-based compensation, increased headcount, and expanded research and development. Stock-based compensation was $980,633 versus $86,042 a year earlier. Investing activities used $48,375; financing activities provided $10,000, reflecting the return of the SBA advance. Cash declined $509,776 during the quarter.
At March 31, 2021, cash was $12.61 million, working capital was $13.41 million, total assets were $24.17 million, total liabilities were $2.04 million, and stockholders’ equity was $22.13 million. The company had no borrowings on its Citibank revolving facility and reported $2 million of unused availability. Management said cash, expected operating cash flows, and facility availability should cover working capital and capital expenditures for at least 12 months from filing. The company also reported an accumulated deficit of $117.44 million.
Material changes and notable items
- Revenue declined year over year, while recurring SaaS revenue increased; the reported revenue comparison was affected by prior-year hardware sales.
- Higher operating costs moved the company from a small prior-year profit to a quarterly net loss.
- The SBA returned the previously repaid $10,000 EIDL advance following legislative relief; the amount was recorded as other income.
- President Garrett Gafke began employment on March 23, 2021, while Bryan Lewis continued as CEO. Gafke received a 90,000-share restricted-stock award and an option for 60,000 shares, subject to vesting.
- Three customers accounted for approximately 59% of Q1 2021 revenue and 55% of accounts receivable at quarter-end, versus approximately 51% of revenue for the same 2020 period.
Outlook, risks, and contingencies
No specific revenue or earnings guidance was provided. Management said COVID-19 had contributed to customer revenue declines and could continue to affect demand, renewals, sales execution, and operations; the full impact was uncertain. The company cited potential economic disruption, customer spending reductions, market volatility, and possible limits on access to capital. It may seek additional funding for growth or other needs, but gave no assurance that financing would be available on acceptable terms.
Federal and state net operating losses were approximately $17 million at December 31, 2020, with some beginning to expire in 2021. Intellicheck maintained a full valuation allowance against net deferred tax assets. It reported no material legal or regulatory proceedings and no material impairment charges in the quarter. Management reported disclosure controls were effective and no material change in internal control over financial reporting.
Key facts for investors to verify
- Whether SaaS growth and customer implementations can offset COVID-related effects and the loss of one-time hardware sales.
- Whether operating expense growth, particularly stock-based compensation and hiring, translates into sustainable revenue growth and improved profitability.
- Customer concentration, receivable collection, and the potential effect of a downturn in key commercial customers.
- Cash burn relative to management’s stated 12-month liquidity outlook, including any future capital needs or use of the revolving facility.
- Potential dilution from outstanding equity awards; the filing reported 1,211,622 excluded anti-dilutive common-stock equivalents for Q1 2021.
- Expiration and usability of tax NOLs, and any changes in COVID-19 conditions or impairment indicators affecting goodwill and intangible assets.