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Information Analysis Releases Second Quarter 2021 Results Highlighted by Increase in Higher Margin Professional Fee Business

·9 min read

Completed Key Acquisition of Tellenger, Inc.

FAIRFAX, Va., Aug. 16, 2021 (GLOBE NEWSWIRE) -- Information Analysis Incorporated (OTCQB: IAIC) (“IAI”) today reported its results for the second quarter and six months ended June 30, 2021, which were highlighted by a significant expansion in professional fee revenues, bottom-line profitability, and the successful closing of the acquisition of Tellenger.

Second Quarter 2021 Financial Highlights (all comparisons to prior year period unless otherwise noted)

  • Professional fees increased to $3.3 million up from $1 million.

  • Gross margin improved significantly, increasing to 20.2% compared with 8.1%; higher-margin professional fees accounted for 70.3% of revenues.

  • Net income of $43,157, compared with a net loss of $(34,620).

  • Adjusted EBITDA1 of $342,428, compared with $(32,356).

  • Secured financing consisting of a $1 million term loan and a $1 million revolving credit line.

Six Months 2021 Financial Highlights (all comparisons to prior year period unless otherwise noted)

  • Total revenues increased to $8.2 million, compared with $6.9 million.

  • Professional fees increased to $5.8 million up from $1.8 million

  • Gross margin improved significantly, increasing to 24.2%, compared with 9.7%; higher-margin professional fees accounted for 70.8% of revenues.

  • Net income of $313,972, compared with a net loss of $(160,789).

  • Adjusted EBITDA of $750,422, compared with $(158,265).

IAI CEO Stan Reese commented, “Our second quarter was highlighted by very strong growth in professional fees. This is our highest margin revenue stream and the favorable mix shift in the quarter resulted in gross margin of 20.2%, compared with 8.1% a year ago. That allowed us to report a profitable quarter despite an increase in SG&A expense which was due in part to the closing of our acquisition of Tellenger in April. The integration of our two businesses has been seamless to date, and IAI is already seeing a meaningful expansion in our sales opportunities. Tellenger brought us added capabilities along with several key high-level clearances, allowing IAI to bid on previously unavailable government contracts.”

Mr. Reese continued, “We have aggressive growth plans for IAI and we have been investing in the resources needed to drive and support those plans through both operational and managerial improvements. The new members of our Board are providing new avenues for potential growth as a result of their industry connections and relationships. We have also added proven sales leadership to leverage and capitalize on those relationships, while solidifying our corporate infrastructure so we can properly manage that growth. While those costs added to our SG&A expense in the near term, we are very confident that those investments will yield a substantial return in the form of substantial growth, both organic and through additional acquisitions.”

Total Revenues
Three and six-month revenues benefited from IAI’s SBA 7a modernization contract, which began in June 2020. The contract is expected to run through May 2027, providing a relatively stable level of professional fees revenues throughout its duration.

Total revenue was $4.7 million for the second quarter ended June 30, 2021, compared with $4.8 million in the prior year quarter. Professional fees increased $2.4 million, or 258.5%, while software sales revenue decreased almost $2.5 million, or 63.9%. The decrease in software revenue in 2021 versus the same period in 2020 is due to the non-recurring nature of software sales transactions, as well as the timing of recurring orders.

Gross Profit / Margin
Gross profit increased $566,912, or 145.7%, to $955,928, in the second quarter of 2021 over the second quarter of 2020, due to the increase in the revenue generated from professional fees. Overall gross profit margin was 20.2% in 2021, up from 8.1% in 2020, due to the increase in professional fees revenue relative to software sales revenue. Gross profit percentage for professional fees in the second quarter of 2021 was 28.0%, while software sales contributed a gross profit percentage of 1.8%.

Income (Loss) from Operations
Income from operations was $53,979 in the second quarter of 2021 compared to a loss from operations of $(34,450) in 2020.

About Information Analysis Incorporated
Information Analysis Incorporated (www.infoa.com), headquartered in Fairfax, Virginia, is an information technology product and services company. The Company is a software conversion specialist, modernizing legacy systems and securely extending their reach to the cloud and more modern platforms.

Additional information for investors
This release may contain forward-looking statements regarding the Company's business, customer prospects, or other factors that may affect future earnings or financial results. Such statements involve risks and uncertainties which could cause actual results to vary materially from those expressed in the forward-looking statements. Investors should read and understand the risk factors detailed in the Company's 10-K for the fiscal year ended December 31, 2020 and in other filings with the Securities and Exchange Commission.

For additional information contact:
Jeremy Hellman, CFA
Vice President
The Equity Group
(212) 836-9626

Matt Sands, CFO
msands@infoa.com
(703) 293-7925


Information Analysis Incorporated
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(unaudited)

For the three months ended June 30,

2021

2020

Revenues

Professional fees

$

3,328,274

$

928,421

Software sales

1,403,687

3,890,974

Total revenues

4,731,961

4,819,395

Cost of revenues

Cost of professional fees

2,397,895

601,672

Cost of software sales

1,378,138

3,828,707

Total cost of revenues

3,776,033

4,430,379

Gross profit

955,928

389,016

Selling, general and administrative expenses

800,137

366,170

Acquisition costs

82,756

-

Commissions expense

19,056

57,296

Income (loss) from operations

53,979

(34,450

)

Other expense, net

(10,822

)

(170

)

Net income (loss)

$

43,157

$

(34,620

)

Comprehensive income (loss)

$

43,157

$

(34,620

)

Net income (loss) per common share - basic

$

-

$

-

Net income (loss) per common share - diluted

$

-

$

-

Weighted average common shares outstanding

Basic

11,980,397

11,211,760

Diluted

12,665,267

11,211,760


Information Analysis Incorporated
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(unaudited)

For the six months ended June 30,

2021

2020

Revenues

Professional fees

$

5,767,533

$

1,772,824

Software sales

2,384,008

5,108,327

Total revenues

8,151,541

6,881,151

Cost of revenues

Cost of professional fees

3,865,594

1,181,303

Cost of software sales

2,310,369

5,032,005

Total cost of revenues

6,175,963

6,213,308

Gross profit

1,975,578

667,843

Selling, general and administrative expenses

1,345,800

706,983

Commissions expense

153,643

122,917

Acquisition costs

153,286

-

Income (loss) from operations

322,849

(162,057

)

Other (expense) income, net

(8,877

)

1,098

Net income (loss)

$

313,972

$

(160,959

)

Comprehensive income (loss)

$

313,972

$

(160,959

)

Net income (loss) per common share - basic

$

0.03

$

(0.01

)

Net income (loss) per common share - diluted

$

0.03

$

(0.01

)

Weighted average common shares outstanding

Basic

11,633,464

11,211,760

Diluted

12,305,182

11,211,760


Information Analysis Incorporated
Condensed Consolidated Balance Sheets

June 30, 2021

December 31, 2020

(Unaudited)

ASSETS

Current assets

Cash and cash equivalents

$

1,532,764

$

1,858,160

Accounts receivable

2,097,521

1,442,231

Contract assets

477,268

-

Prepaid expenses and other current assets

138,686

142,770

Total current assets

4,246,239

3,443,161

Intangible assets, net of amortization of $43,851 and $0

2,231,149

-

Contract assets - non-current

-

210,688

Right-of-use operating lease asset

297,620

51,405

Property and equipment, net of accumulated depreciation

and amortization of $324,442 and $312,320

72,498

62,166

Other assets

5,706

6,281

Total assets

$

6,853,212

$

3,773,701

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable

$

747,942

$

103,646

Revolving line of credit

402,306

-

Notes payable - current

855,134

93,009

Accrued payroll and related liabilities

571,089

375,168

Commissions payable

256,075

181,626

Other accrued liabilities

116,308

57,399

Contract liabilities

105,884

946,884

Operating lease liability - current

18,008

45,595

Total current liabilities

3,072,746

1,803,327

Note payable - non-current

661,533

356,991

Operating lease liability - non-current

273,906

-

Total liabilities

4,008,185

2,160,318

Stockholders' equity

Common stock, $0.01 par value, 30,000,000 shares authorized,

13,688,306 and 12,904,376 shares issued, 12,045,690 and

11,261,760 shares outstanding as of June 30, 2021,

and December 31, 2020, respectively

136,882

129,043

Additional paid-in capital

15,629,898

14,720,065

Accumulated deficit

(11,991,542

)

(12,305,514

)

Treasury stock, 1,642,616 shares at cost

(930,211

)

(930,211

)

Total stockholders' equity

2,845,027

1,613,383

Total liabilities and stockholders' equity

$

6,853,212

$

3,773,701


Non-GAAP Financial Measures
In assessing the performance of our business, management utilizes a variety of financial and performance measures. The key measure is Adjusted EBITDA, a non-GAAP financial measure. We define Adjusted EBITDA as net income (loss) plus depreciation and amortization expense, net interest expense (income), and taxes, as further adjusted to eliminate the impact of, when applicable, expenses that are unusual or non-recurring that we believe do not reflect our core operating results. and non-cash stock-based compensation. We believe that Adjusted EBITDA is meaningful to our investors to enhance their understanding of our financial performance for the current period and our ability to generate cash flows from operations that are available for taxes, capital expenditures and debt service. We understand that Adjusted EBITDA is frequently used by securities analysts, investors and other interested parties as a measure of financial performance and to compare our performance with the performance of other companies that report Adjusted EBITDA. Our calculation of Adjusted EBITDA, however, may not be comparable to similarly titled measures reported by other companies. When assessing our operating performance, investors and others should not consider this data in isolation or as a substitute for net income (loss) calculated in accordance with GAAP. Further, the results presented by Adjusted EBITDA cannot be achieved without incurring the costs that the measure excludes. A reconciliation of net income (loss) to Adjusted EBITDA, the most comparable GAAP measure, is provided below.

We refer to our estimated revenue on uncompleted contracts, including the amount of revenue on contracts for which work has not begun, less the revenue we have recognized under such contracts, as “backlog.” Backlog includes unexercised contract options.

Reconciliation of Net income (loss) to Adjusted EBITDA

Three months ended
June 30,

Six months ended
June 30,

(in thousands)

2021

2020

2021

2020

Net income (loss)

$

43,157

$

(34,620

)

$

313,972

$

(160,959

)

Adjustments:

Depreciation

6,739

1,738

12,122

2,986

Amortization

43,851

43,851

Interest expense (income), net

10,822

170

8,877

(1,098

)

Acquisition Costs

82,756

153,286

Non-cash stock-based compensation

111,862

356

139,573

806

Post-employment agreement

35,500

71,000

Moving expense

7,741

7,741

Taxes

Adjusted EBITDA

$

342,428

$

(32,356

)

$

750,422

$

(158,265

)

1 Please see non-GAAP reconciliation on page 8