Intellicheck, Inc. Q3 FY2023 earnings

Intellicheck reported third-quarter revenue of $4,760,000, up 18.6% from $4,012,000 in the prior-year quarter. Gross profit rose to $4,332,000 from $3,654,000, an increase of 18.6%. Gross margin was 91.0%, essentially flat from 91.1% a year earlier. The company's operating loss widened to $815,000 from $724,000, but net loss narrowed to $644,000 from $724,000. Diluted EPS improved to -$0.03 from -$0.04. The release highlighted record SaaS revenue as the main driver and pointed to continued adoption beyond banking and credit card issuers. Total revenue and gross profit grew at the same rate in the quarter, while the operating loss took some shine off the top-line gain.

The nine-month picture showed similar top-line momentum and better operating leverage. Revenue for the nine months ended September 30, 2023 was $13,730,000, up 20.3% from $11,415,000. Gross profit rose to $12,618,000 from $10,377,000, up 21.6%. Gross margin improved to 91.9% from 90.9%, a gain of 1.0 percentage point. The nine-month operating loss narrowed to $2,898,000 from $3,290,000, and net loss narrowed to $2,737,000 from $3,290,000. Diluted EPS for the nine months improved to -$0.14 from -$0.17. Operating margin for the nine months was -21.1%, up from -28.8%. For the quarter alone, operating margin was -17.1%, up from -18.0%. The year-to-date results show a wider gross margin and a smaller operating loss than the prior-year period, even as the current quarter produced a slightly wider operating loss.

Cash flow and backlog metrics carried mixed signals. Operating cash flow was negative $258,000 in the quarter, compared with negative $173,000 in the prior-year quarter, a 49.1% decline. For the nine months, operating cash flow was negative $1,114,000, compared with negative $1,711,000, an improvement of 34.9%. Capital expenditures were $37,000 in the quarter, up from $9,000, and $68,000 for the nine months, down from $165,000. Deferred revenue was $2,153,000 at September 30, 2023, up 24.5% from $1,730,000 a year earlier. Remaining performance obligations were $2,153,000, up 24.3% from $1,732,000. The quarter's operating cash flow decline contrasts with the year-to-date improvement, which reflects the larger prior-year cash use. Deferred revenue and remaining performance obligations both stood at $2,153,000, pointing to a similar contracted backlog figure at the end of the period.

Management highlighted record SaaS revenue and progress beyond banking and credit card issuers into real estate, automotive, and digital validation. It also pointed to the company's no-hardware product and 99% plus accuracy as competitive advantages. The risks are familiar for a small software company with long sales cycles. The safe harbor statement cites market acceptance, the ability to convert pilot programs into commercial scale, changing demand, and the ability to reduce or maintain expenses while increasing sales. It also lists government data access, security breaches, product failure, regulatory changes, and supply chain delays. The safe harbor statement also notes risks tied to an epidemic, pandemic, or other public health issue, inflation, and customer results. The MD&A adds that reviews of historical state sales and use tax liabilities may lead to adjustments to taxes or net operating losses. Intellicheck will conduct its 2023 annual goodwill impairment test in the fourth quarter, and it continues to monitor its stock price and operations for impairment indicators. The company is not currently involved in any legal or regulatory proceeding expected to have a material adverse effect. Management states that available cash, expected cash from operations, and availability under the revolving line of credit should meet working capital and capital expenditure requirements for at least the next 12 months from the filing date. The release did not include specific revenue or earnings guidance for the fourth quarter or full year. The preliminary results are subject to the completion of the quarterly review process and the filing of the Form 10-Q. The company also keeps the option to raise additional funds for faster expansion, marketing, new markets, operating infrastructure, competitive pressures, or acquisitions, though it offers no assurance it can do so on satisfactory terms. The MD&A says the company has not entered into any off-balance sheet financing arrangements or established special purpose entities, and it has not guaranteed any debt or commitments of other entities or entered into options on non-financial assets.