Intellinetics, Inc.

Greetings, and welcome to the Intellimatics second quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Roger Grabner. Thank you, Roger. You may begin.

Thank you and good afternoon, everyone. I am pleased to welcome you to Intellinetics 2025 second quarter conference call. Before we begin, I would like to remind listeners that during this conference call, comments made by management may include forward-looking statements regarding Intellinetics Inc. that are not historical facts. These forward-looking statements are based on the current expectations and beliefs of management and they are subject to risk and uncertainties that could cause such statements to differ materially from actual future events or results. Intellinetics Inc. undertakes no duty to update any forward-looking statements. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the press release issued today, as well as risk and uncertainties included in the section under the caption, Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations, an Intellinetics Annual Report on Form 10-K or the Quarterly Report on Form 10-Q filed today. Also, please note that on the call today, management will discuss non-GAAP financial measures such as adjusted EBITDA. Non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. It may be different from non-GAAP financial measures presented by other companies. A reconciliation between GAAP and non-GAAP measures can be found in the press release issued today. With all that said, I would now like to turn the call over to Jim DiSocio, Intellinetics President and CEO. Jim, the call is yours.

Thank you, Roger. We have a lot of great things going on, and I'm excited to provide an update. First, I'd like to address our temporary reduction in revenue volume in Q2. The major contributor to our Q2 revenue results falling short of last year Q2 is the reduction of digital transformation work, going up in our professional services revenue line. This reduction corresponds to the timing of our June 1st renewal of our five-year contract with our largest customer. We use the word temporary intentionally. We have since the signing of the contract rebuilt our backlog with orders in hand that will provide transformation work back to historical levels before the end of Q3. And this backlog of orders and work will take us into Q126 without having to close another major contract. And we're not stopping. Our goal is to have an even longer runway of backlog. In addition, we've just completed successful testing on a large microfilm conversion project that will add more revenue in Q4 and beyond. Further, as a reminder, our June 1 contract renewal is for five years with an additional five-year extension. That's a very good time horizon for us, but we're not resting there. We are working to expand sales through our other channels. We've had success there in recent years, taking our largest commercial reseller from $250,000 in annual revenue five years ago to over $750,000 in annual revenue in 2024. On the south side, we've grown revenues 12.6% in Q2 this year over last year Q2. Frankly, I'm disappointed. I wanted more growth than that. Two of our key target vertical markets have faced their headwinds this year, particularly in Q2. Construction and home building face stubbornly higher interest rates and the threat of tariffs, causing them to pause major projects. K-12 education is worried about the impacts of cuts to public education. I want to be clear that we're not losing orders, but we are experiencing longer lead times on new sales from these factories. a two-month buy cycle can become three or even a bit longer. That said, we are currently seeing renewed activity, and we are optimistic that customer decision-makers are moving past the early pause button mentality and are seeing that our products save them time, money, and provide expanded visibility into their critical performance data. We have modified our messaging to more crisply articulate that now is the time to realize the ROI that our solutions offer. More than ever, I continue to believe that now is the time to invest in sales and marketing to enhance what we do in every aspect of the customer lifecycle. From initial messaging, marketing campaigns, sales material, and sales process, and nurturing existing customers using a customer success model. Some specific successes include hiring industry and AI subject matter experts. Our enhanced industry expertise in the construction and home building space, specific to payables automation, has already resulted in key payables automation win, and we have improved our messaging to key buyers in the home building market. Our strengthened AI expertise expedients leveraging AI technology for more wins with customers and accelerated development. Our historical consolidating sales and market spend as a percent of revenue has barely broken into low teens. Usually, fast-growing software companies or SaaS software companies spend 40% or more of revenues on sales and marketing. We're financing our growth out of current cash flow, as we have been, And I believe that even with these modest investments, we can take our growth to the next level. Our investment in sales and marketing include identifying partners to expand our partner-based customer acquisition model. Our increased infrastructure spending includes the development and implementation resources to programmatically bring on new partners, validate our solutions in the market, and then accelerate integration. Our mission is to expand partner ecosystems and happy customers. Further, we're committed to leveraging AI in several ways, which fall into three distinct core pillars. One, new features, including AI agents within our solutions. Two, marketing and customer support. And three, leveraging existing tools to significantly accelerate our internal development both in bringing new features to market faster and enhancing the customer user interface and ensuring behind the scenes data center efficiencies and compliance. As you can tell from the excitement of my voice, we're at an inflection point. After successfully paying off $7.6 million in debt and earnouts the last few years, $6.3 million of that was from cash flow we generated, and $1.3 million in equity. We are now positioned to invest in sales and marketing and development as we transform ourselves to grow more rapidly. Our solutions bring ROI, efficiencies, and executive transparency. On top of that, our implementations are low-fit, low-change management relative to major players. Our customers win, and we win. At this time, I would like to turn the call over to our Chief Financial Officer, Joe Spain.