Intellicheck, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022, compared with FY2021. This is an annual filing; it does not provide standalone fourth-quarter results. Dollar amounts below are in millions unless otherwise noted.
Business context
Intellicheck provides identity validation and fraud-prevention software, primarily through cloud-based SaaS services. Its products are used in financial services, retail, e-commerce, age verification, and government and law-enforcement applications. The company reported one operating segment.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $15.966 | $16.393 |
| SaaS revenue | $15.728 | $12.970 |
| Gross profit / gross margin | $14.691 / 92.0% | $12.882 / 78.6% |
| Operating expenses | $18.413 | $20.375 |
| Operating loss | $(3.722) | $(7.493) |
| Net loss / loss per share | $(3.851) / $(0.20) | $(7.478) / $(0.40) |
| Adjusted EBITDA (non-GAAP) | $(0.924) | $(0.924) |
| Cash used in operating activities | $(3.480) | Cash provided: $1.116 |
Revenue declined 3%, primarily because of lower non-recurring equipment sales. SaaS revenue grew 21%. Gross margin improved mainly because SaaS represented more revenue and FY2021 included lower-margin hardware sales; excluding hardware sales and related costs, gross margin was 92.9% versus 93.2%.
At year-end, cash and cash equivalents were $5.196, short-term U.S. Treasury investments were $4.880, working capital was $9.373, total assets were $22.453, and stockholders’ equity was $18.504. Cash fell $8.455, primarily reflecting the purchase of Treasury notes classified as short-term investments. The company had no borrowings under its $2.000 revolving credit facility; $0.097 remained payable under an insurance-premium financing arrangement. The filing reports sufficient resources for anticipated needs for at least 12 months from filing.
Material changes and notable items
- Gross profit increased 14%, while operating expenses declined 10%. SG&A fell 17%, mainly due to lower stock-based compensation and headcount-related costs; R&D increased 10%, primarily from personnel costs and related compensation.
- Top ten customers accounted for 72% of revenue, down from 79% in FY2021. Three customers generated 52% of FY2022 revenue, and four customers represented 63% of year-end receivables.
- The company reported no goodwill impairment; goodwill was $8.102. The auditor identified the goodwill impairment assessment as a critical audit matter because of the significant judgment involved in valuation assumptions.
- The 2021 financial statements had previously been restated to correct the classification and valuation of certain exercised options associated with tax-withholding shares.
Outlook, risks and controls
Management expects existing resources, operating cash flows and available credit to cover working-capital and capital-expenditure needs for at least 12 months. It gave no specific revenue, earnings or margin guidance. Management may seek additional capital for expansion or other needs, but there is no assurance of availability or acceptable terms.
Key risks include continued losses and operating cash use, customer concentration, long sales and implementation cycles, competition and technology changes, dependence on government reference data and a limited supplier base, and cybersecurity, privacy and product-performance risks. The company reported a $3.851 net loss, $3.480 of operating cash use and a $130.748 accumulated deficit for FY2022.
Management concluded that disclosure controls and internal control over financial reporting were ineffective at December 31, 2022 because of a material weakness in controls over accounting for shares withheld to settle tax liabilities. Remediation was underway and would be considered complete only after effective operation was tested. A previously disclosed weakness in equity-compensation accounting was reported remediated. The financial-statement auditor issued an unqualified opinion; the auditor did not attest to internal-control effectiveness.
Investor verification priorities
- Track SaaS growth, total revenue, customer concentration and the conversion of growth into positive operating cash flow.
- Verify progress and testing of remediation for the current material weakness in share-withholding accounting.
- Assess liquidity and cash burn, including Treasury investment maturities, credit-facility availability and any need for additional capital.
- Review the assumptions underlying the $8.102 goodwill balance and monitor for impairment indicators.
- Confirm the effect of stock-based compensation and potential equity dilution; 1,512,824 options, RSUs and PSUs were outstanding at year-end.