A Columbus maker of document-management software has made its third acquisition in the past two years and turned profitable after more than 25 years in business.
Intellinetics Inc. acquired Yellow Folder LLC on April 1 for a preliminary price of $6.5 million, according to a regulatory filing. With $3.1 million in sales last year, the Dallas-based company extends Intellinetics into K-12 education, according to a release.
Revenue leaped by 39% to $11.5 million in 2021, compared with $8.3 million the year before and $2.5 million in 2019, Intellinetics said in its annual report. For the first time since its 1996 founding, net income was positive: $1.36 million, a turnaround from a $2.2 million loss in 2020.
Adjusted to remove one-time items such as transaction costs from the mergers, results turned positive in 2020, CFO Joseph Spain said via email. The company reported adjusted earnings of $1.7 million in 2021 and $803,000 the prior year, according to a release.
"This has been a great year for Intellinetics despite the many challenges we have faced with Covid and the onset of inflationary pressures," CEO James DeSocio said in the release. Nearly one-third of orders signed in 2021 were new customers that add to recurring revenue, he said.
Yellow Folder's 14 employees bring the whole company to 128 employees, Spain said, mostly in Ohio and Michigan. That's up from fewer than 20 at the end of 2019.
The company, which trades over-the-counter under the ticker INLX, has an accumulated deficit of $21.6 million. It has kept operating by raising outside capital, last year converting most of its outstanding debt to equity.
Principals of New York City investment firm Taglich Brothers Inc. owned a combined 27% of outstanding shares as of the most recent proxy from April 2021, and filings show them adding shares since then. Taglich is the placement agent for a new private offering of $8.7 million, which is financing the Yellow Folder deal and working capital.
Founded in 1996, Intellinetics helps offices go paperless, and in recent years shifted to more profitable software-as-a-service from licensing installed versions of its technology.
It acquired two document imaging businesses in Michigan in early 2020, reaching the deals just before stay-at-home orders in the pandemic:
- Graphic Sciences Inc., a document imaging company, up to $6 million over three years; so far it has paid $4.7 million.
- CEO Imaging Systems Inc. for up to $370,000 over two years.
The two businesses were "the largest contributors" to the jump in revenue and earnings, Spain said.
And that's despite pandemic disruption: Both rely on in-person work scanning paper documents for digital conversion, which in Michigan was restricted to essential jobs early in the pandemic. The state of Michigan, the largest client, produced less work when government offices were shut.
Intellinetics invested in a new consolidated imaging center last year, increasing both capacity and efficiency, it said in the release.
"We are positioned for 2022 better than ever in our history," DeSocio's statement said. An interview is scheduled later this week.
