Intellicheck, Inc. Q2 FY2023 earnings

Intellicheck reported second-quarter revenue of $4.72 million, up 17.7% from $4.01 million in the same period last year. For the six months ended June 30, 2023, revenue rose 21.2% to $8.97 million from $7.40 million. The top line benefited from SaaS revenue growth of 19%. Intellicheck has now posted 42 consecutive months of growth in trailing 12-month SaaS revenue. The company provides identity validation solutions for KYC, fraud prevention, and age verification across financial services, fintech, retail, and government markets. The press release called the results record second quarter 2023 financial results. The company said the increase in revenues was primarily the result of higher SaaS revenue growth for the current period.

Gross profit for the quarter increased 19.8% to $4.36 million from $3.64 million. Gross margin expanded to 92.5% from 90.9%, an increase of 1.6 percentage points. For the six months, gross profit rose 23.2% to $8.29 million from $6.72 million, with gross margin up 1.6 percentage points to 92.4%. The company attributed the margin gain to a higher concentration of SaaS revenue, a slight decline in hardware revenue, and an improved cloud cost structure. The company said it had no events or changes in circumstances during the six months ended June 30, 2023 that would more likely than not reduce the fair value of the company below its carrying amounts.

The bottom line improved. The operating loss narrowed to $0.77 million from $1.10 million, and the operating margin improved to negative 16.4% from negative 27.4%, up 11.0 percentage points. For the six months, the operating loss narrowed to $2.08 million from $2.57 million, with the operating margin improving to negative 23.2% from negative 34.7%. Net loss for the quarter narrowed to $0.78 million from $1.10 million. Diluted loss per share was $0.04, compared with $0.06 in the prior-year quarter. On a year-to-date basis, net loss narrowed to $2.09 million from $2.57 million, and diluted loss per share improved to $0.11 from $0.14.

Adjusted EBITDA turned positive at $36,000 for the quarter, compared with negative $583,000 a year earlier. That is a non-GAAP measure. Operating expenses increased 8% in the quarter, driven by higher general and administrative costs, including non-restructuring severance expenses, and higher accounting and professional fees. The company said the increase in operating expenses was primarily driven by higher general and administrative costs, specifically headcount-related expenses tied to non-restructuring severance expenses, as well as higher accounting and professional fees. Management also promoted Jeff Ishmael to chief operating officer and hired Jonathan Robins as vice president of engineering, aiming to strengthen product development. The company said it continues to refine its organization to expand penetration in key market verticals.

Cash flow was a weak spot. Operating cash flow for the quarter was negative $1.09 million, down from positive $0.86 million in the prior-year quarter. For the six months, operating cash flow was negative $0.86 million, an improvement of 44.3% from negative $1.54 million. Capital expenditures were $0.01 million in the quarter, down 44.0% from $0.02 million. Year-to-date capital expenditures were $0.03 million, down 80.1% from $0.16 million. Deferred revenue, current portion, declined 25.8% to $1.32 million from $1.78 million. Remaining performance obligations also fell 26.0% to $1.32 million from $1.78 million. The company had no off-balance sheet financing arrangements and has not established any special purpose entities.

Management did not provide formal guidance for the third quarter or the full year. The company said it expects available cash to be sufficient for at least the next 12 months. Risks include continued net losses, negative operating cash flow in the quarter, and the decline in deferred revenue and RPO. The company also noted that it monitors its stock price and operations for potential goodwill impairment, though no triggering events occurred in the first half of 2023. Intellicheck maintains a full valuation allowance on its deferred tax assets. The company stated it may raise additional funds to respond to business contingencies or to fund faster expansion. It also has approximately $20.8 million in net operating loss carryforwards as of December 31, 2022, with $10.9 million expiring between 2035 and 2037. The company is not currently involved in any legal or regulatory proceeding, or arbitration, the outcome of which is expected to have a material adverse effect on its business.