Intellinetics, Inc. (INLX) - Q2 2026 10-Q Summary
Business Context and Reporting Period
This Quarterly Report on Form 10-Q covers the period ended June 30, 2026. Intellinetics, Inc. is a document services and software solutions company operating through two segments: Software (SaaS and on-premise document management) and Document Services (scanning, conversion, and storage). The company serves primarily government and K-12 education sectors, with the State of Michigan representing a significant portion of revenue.
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Total Revenues | $3,946,477 | $4,010,813 | $7,855,659 | $8,258,158 |
| Gross Profit | $2,618,987 | $2,726,557 | $5,101,046 | $5,553,757 |
| Gross Margin % | 66.4% | 68.0% | 64.9% | 67.3% |
| Net Loss | $(1,086,138) | $(567,590) | $(2,263,991) | $(1,295,155) |
| Net Loss Per Share (Basic/Diluted) | $(0.24) | $(0.13) | $(0.51) | $(0.31) |
| Cash and Equivalents (End of Period) | $1,713,637 (as of June 30, 2026) | |||
| Operating Cash Flow (YTD) | $(186,094) Used | $112,521 Provided | ||
| Debt | No outstanding indebtedness as of June 30, 2026. |
Material Changes vs. Prior Period
- Revenue Decline: Total revenue decreased 1.6% in Q2 and 4.9% YTD compared to 2025. This was primarily driven by a reduction in Professional Services within the Document Services segment due to project timing and lower backlog.
- SaaS Growth: Software as a Service (SaaS) revenue grew 4.2% in Q2 and 2.2% YTD, attributed to new payables automation customers.
- Margin Compression: Gross margins declined to 66.4% in Q2 (from 68.0% in Q2 2025) and 64.9% YTD (from 67.3% in 2025). The decline was driven by a mix shift toward lower-margin professional services and increased hosting costs for SaaS.
- Expense Increase: Operating expenses increased 14.7% in Q2 and 9.3% YTD. General and Administrative (G&A) expenses rose significantly due to CEO transition costs (severance and recruiting) and share-based compensation ($920,795 YTD 2026).
- Loss Expansion: Net loss widened significantly, doubling in Q2 and increasing by 75% YTD compared to the prior year periods.
Guidance, Outlook, and Risks
- Outlook: Management expects GAAP revenue from recent bookings to be recognized primarily in the second half of 2026 and beyond. The company believes its capital resources are sufficient for the next 12 months.
- Liquidity: The company holds $1.7 million in cash and has a $1 million secured line of credit with JPMorgan Chase (expires Dec 31, 2026). An At-The-Market (ATM) equity offering program has approximately $8.2 million remaining available.
- Risks:
- Customer Concentration: The State of Michigan accounted for 32% of Q2 revenue and 36% of YTD revenue. Government contracts represent ~77% of total revenue.
- Economic Sensitivity: Performance is tied to state/local government spending and K-12 education budgets.
- Valuation Allowance: A 100% valuation allowance is maintained on deferred tax assets due to uncertainty in realizing future taxable income.
Investor Verification Checklist
- Verify the status and renewal terms of the contract with the State of Michigan, given its 36% revenue concentration YTD.
- Monitor the Document Services backlog to confirm if the "refilled" project pipeline translates to revenue in Q3/Q4 2026.
- Review the trajectory of Professional Services margins to ensure the mix shift does not permanently erode profitability.
- Assess the impact of CEO transition costs on future G&A expenses to determine if the Q2 expense spike is a one-time event.
- Confirm the utilization of the $1 million JPMorgan Chase credit line and the status of the ATM equity program.