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

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 (, 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
(703) 293-7925

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

        For the three months ended June 30,
          2021       2020  
  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)

        For the six months ended June 30,
          2021       2020  
  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
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  
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 )  
    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        
Adjusted EBITDA $ 342,428     $ (32,356 )     $ 750,422     $ (158,265 )  

1 Please see non-GAAP reconciliation on page 8

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