Two years after needing federal coronavirus relief and investor backing to stay afloat, one of Columbus' smallest public companies has recorded its first-ever annual net profit and is making another acquisition.
Intellinetics Inc. has added several large subscribers to its software, so two-thirds of revenue now is recurring. And it's looking for more acquisitions.
"The future is extremely bright at this point," CEO James DeSocio said.
"I’m having more fun in my career than I’ve had in a long time," DeSocio told Columbus Business First. "We have strong investors behind us. ... The pipeline is stronger than it’s ever been."
The acquisitions have brought hundreds of customers in tough-to-crack markets like school districts, plus the ability to offer end-to-end services for customers digitizing paper records.
But the pandemic crashed through right as two of the deals were closing in March and April 2020. Safety orders temporarily closed the newly acquired Michigan document-scanning centers and slowed business. Intellinetics needed an $838,000 federal Paycheck Protection Program loan to keep its staff, as well as backing from longtime investors.
The company emerged stronger, DeSocio said. It built a consolidated imaging center in Michigan last year, increasing both capacity and efficiency. Now it can securely store paper for clients and act as an offsite mail room.
This April Intellinetics acquired Dallas-based Yellow Folder LLC for a preliminary price of $6.5 million. It's seeking more deals, CFO Joe Spain said.
"Getting to that next level of critical mass gave us a strong foothold," Spain said.
Revenue grew 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.
The company reported adjusted earnings, removing one-time items such as transaction costs from the mergers, of $1.7 million in 2021 and $803,000 the prior year. Through this March, adjusted earnings have been positive for eight consecutive quarters, DeSocio said.
Intellinetics' core software manages documents that have been scanned from paper, microfiche and other sources, enabling digital analysis, redaction, and workflows such as sending an invoice to the next person in the approval chain. The acquired companies do the actual scanning.
"The ability to cross sell within these school districts is substantial," DeSocio said.
“You go into an organization with file cabinets – a school district with 90 years of student records – there’s golden information in those records,” he said. “Everything you want to know about your population and where it’s been and where it’s going, it’s hard to take advantage of it when it’s in a file cabinet in the basement.”
Clients now can outsource entire business processes to Intellinetics, such as opening mail, scanning the contents and processing the resulting digital files into a searchable database. For example, clients can find out which employees need to renew licenses soon.
The company started by digitizing accident reports for police departments, and has several government agencies as customers.
Yellow Folder brought the company to a total of 128 employees, including about 20 in the software division. Its largest scanning and document storage facility is in Michigan, but a smaller Columbus center employs workers with autism referred by Arc Industries.
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.
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.
Without Taglich, DeSocio said, the company "probably would not have made it."
"They’re not just an investment house," he said. "They’re a strategic partner and they’ve helped us grow the business."
