Intellicheck, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Intellicheck develops identity-authentication and threat-identification products for commercial, government, military, retail and banking customers.
Financial performance
| Metric | Q1 2020 | Q1 2019 |
|---|---|---|
| Revenue | $3.115 million | $1.279 million |
| Gross profit / margin | $2.422 million / 77.8% | $1.087 million / 85.0% |
| Operating income (loss) | $24,534 | $(1.219) million |
| Net income (loss) | $26,602 | $(1.213) million |
| Adjusted EBITDA (non-GAAP) | $144,371 | $(787,161) |
| Cash used in operating activities | $(460,657) | $(542,249) |
- Revenue rose 144%, primarily on higher commercial revenue. SaaS revenue increased 160% to $2.238 million; equipment revenue increased to $784,000 from $116,000.
- Gross margin declined year over year, which management attributed primarily to a larger share of lower-margin hardware sales.
- Operating expenses increased 4% to $2.398 million; higher incentive-plan accruals and legal fees were partly offset by lower stock-based compensation.
- Cash declined to $3.010 million from $3.351 million during the quarter. Investing activities used $115,394, including the $100,000 initial payment for a software license; financing provided $235,287 from stock-option and warrant exercises.
Financial position and liquidity
- At March 31, 2020, cash was $3.010 million, working capital was $3.129 million, total assets were $14.335 million and stockholders’ equity was $12.097 million. Accumulated deficit was $116.909 million.
- Current liabilities were $2.226 million. The company had a $300,000 note payable for the software license, due by December 31, 2020. No amounts were drawn on its revolving credit facility; stated unused availability was $2.0 million.
- Management expected cash, operating receipts and available credit to meet working-capital and capital-expenditure needs for at least 12 months, while noting that weaker performance or higher expenses could require financing or expense reductions.
- After quarter-end, Intellicheck received $796,100 under the SBA Paycheck Protection Program. The unsecured note bears 1% interest and is repayable within two years to the extent not forgiven, subject to program conditions.
Outlook, risks and other notable items
- No quantified revenue or earnings guidance was provided. Management expected COVID-19 to negatively affect revenue at least in the short term, citing retail closures or restricted hours and uncertainty about reopening, customer demand and consumer spending. The company reported no significant COVID-19 disruption during Q1 but said the future effects were uncertain.
- Three customers generated approximately 51% of Q1 revenue and represented 45% of period-end receivables, up from two customers contributing approximately 26% of revenue in Q1 2019.
- The company acquired software-license rights for $400,000, paid $100,000 initially and recorded the remaining $300,000 as a payable. The asset was added to intangible assets; no impairment charges were reported.
- Intellicheck reported no material legal proceedings. Management stated disclosure controls were effective and there was no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether COVID-19 affected subsequent-quarter sales, customer activity, collections and cash needs, particularly given the customer concentration.
- Whether the PPP loan qualifies for full or partial forgiveness and how any unforgiven amount is repaid.
- Whether revenue growth and SaaS momentum continued, and whether the product mix restored gross margins after Q1’s hardware-related decline.
- Cash burn, access to the revolving facility, and payment of the $300,000 software-license obligation.
- Potential dilution from outstanding options, warrants, restricted stock units and any future capital raising.