Greetings. Welcome to Intellinetics' Fourth Quarter and Full Year 2023 Earnings Call. At this time, all participants are in a listen-only mode. The question-and-session will follow the formal presentation. [Operator Instructions] Please note that this conference is being recorded. I now turn the conference over to Tom Baumann with Investor Relations. Tom, you may now begin your presentation.

Thank you. Good afternoon, everyone. I am pleased to welcome you to Intellinetics' fourth quarter and full year 2023 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 that are not historical facts. These forward-looking statements are based on the current expectations and beliefs of management, and they are subject to risks and uncertainties that could cause such statements to differ materially from actual future events or results. Intellinetics 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 risks and uncertainties included in the section under the caption Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations in Intellinetics' annual report on Form 10-K filed today. Also, please note that on the call today, management will discuss non-GAAP financial measures, such as adjusted EBITDA, recurring revenue and total contract value. 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. The reconciliation between GAAP and non-GAAP measures can be found in the press release issued today and the total contract value will be described on today's call. With all that said, I'd like to now turn the call over to Jim DeSocio, Intellinetics' President and CEO. Jim, the call is yours.

Thank you, Tom. This was a strong year for Intellinetics as we effectively integrated prior acquisitions; grew our recurring SaaS revenue; and established another revenue stream to drive our next phase of growth, our Intellinetics payable automation solution or what we call IPAS. We entered 2024 with strong momentum and a stable baseline with consistent profitability and cash generation we expect to invest in our IPAS solution and expand our cross-selling efforts in 2024, enabling accelerating profitability as we scale. For the year ended December 31, 2023, we grew revenue more than 20% and increased SaaS revenue by nearly 28%. This growth combined with prudent expense management, enabled earnings per share of $0.13 per fully diluted share, up from just a penny per share last year. Net income was $519,000 compared to $24,000 in 2022. Excluding non-cash items, such as depreciation and amortization, we grew our adjusted EBITDA by nearly 14% to a record $2.7 million for the year. This performance includes only a small contribution from our new IPAS solution. As a reminder, IPAS is a new enterprise class software payables automation solution for financial platforms with very complex cost accounting. We are collaborating with Constellation HomeBuilders Systems, part of the $5 billion Constellation Software family to broaden awareness for IPAS, especially in the homebuilder market. To-date, four Constellation customers have gone live with IPAS and we have now signed contracts with five additional customers, scheduled to go live during the first half of 2024. In the aggregate, these nine Constellation customers represent an estimated combined annual recurring revenue of $500,000, and we expect to more than double the customer count in this business over the next few quarters. Importantly, the homebuilder market is just one of many target verticals for IPAS. And while Constellation is the ideal channel…

Thanks, Jim. I will now review our financial results for the fourth quarter of 2023. Total revenue for the quarter increased 3.8% to $4.2 million as compared to $4 million for the same period last year. The following are the components of our revenue presented in our statements of income. Subscription software, which is comprised of SaaS including hosting revenue and software maintenance services revenue increased to $1.68 million for the quarter from $1.57 million for the same period last year. SaaS grew 8.8% and consistent with history and as expected, our software maintenance services are growing more slowly and we're flat to 2022. Professional services revenue increased 4.7% to $2.2 million for the quarter from $2.1 million for the same period last year. As a percentage of total revenue, professional services revenue was 53% of total revenue for the quarter, the same as last year. Storage and retrievable services revenue for the quarter was relatively flat year-over-year at $266,000. Consolidated gross margin increased 98 basis points to 64.9% for Q4 this year compared to 63.9% last year. The increase was driven by both a better revenue mix but more growth weighted towards recurring revenue and positive impact from price increases. Operating expenses increased 17% to $2.5 million for Q4 2023 compared to $2.2 million in 2022. The increase was largely due to the timing of equity compensation expenses as well as investments in structure and scale. Sales and marketing expenses for the quarter decreased 23% compared to the same period during 2022, which is largely a timing matter. We continue to invest in marketing and sales. As Jim noted, we're expanding our sales force. We're also increasing our tradeshow activity in 2024 which is important to both our IPAS and K12 acceleration. Net income for Q4 was $62,000 compared…

Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question is from the line of Howard Halpern with Taglich Brothers. Please proceed with your question.

Awesome. Congratulations. Great quarter, great year, and hopefully, good start to 2024.

Thanks Howard.

Yes. In terms of IPAS, can you talk about deal size compared to your base offerings?

Yeah, we could do that. The K-12 offering back when we were managing the K-12 offering, is anywhere from $3,000 to probably $8,000 average sale size. The IPAS offering and the deals we've closed already is north of $35,000 on annual recurring revenue. So, there's bigger ones and there's the average about $35,000 but as we enhance the product and add more functionality to the product i.e. PO processing, that will bring the price up a little bit higher as well.

Okay. And is part of the investments that you're going to be making with IPAS, are you going to be able to drive down implementation time, as you implement more customers?

Yeah, that's a good question, Howard. So I've been in the software business my entire career and this was a brand-new release, at least new for our implementation people. So the first two implementations -- the first four implementations, took us a little longer. It was a new product. You find a bug, you have to fix it to implementing it. But now we are very confident. As part of that development process, we've built some new implementation tools as well. So, rather than our people having to go in and actually do the work for the customer, these new tools will facilitate them doing the product -- the implementation and a good part of their implementation themselves. So, those tools are scheduled to come out and imminently. So, we're in good shape there. And as you know, the more you implement, the easier it gets. The more you learn what the customer is looking for, what they're asking and yes, we assume that it's going to get much easier for us.

And are you migrating within Constellation into different verticals? Or are you going to other companies to implement IPAS or…

Yeah. So, the plan is to do both. We have hired a sales rep and part of responsibilities as new partners. So now that we're confident that we have a really solid product out there. We are looking at other verticals that we can go into. And we are also -- Constellation owns 1000 companies. So we've identified a number of companies that we could start calling on. So again, it is a new release and it is installed now. The customers are very happy very, very happy and we're very confident that we can take these two new verticals within and out of Constellation.

And circling back to the K-12 offerings, do you still anticipate new districts coming online in the 15 to 20 districts a quarter, type of a pace, is that what you're seeing?

Yes.

Okay. And our last question -- yes?

No, go ahead, Howard.

Last question is, you talked about the $400,000 spend. Is that going to be front-loaded in the first half of the year or spread out throughout the year?

It's spread out, but more towards the back end. We've already hired one sales rep and we're actually are planning to hire some implementation people and then depending on development cycle. Yes, so it's more back end of the year. I would say, third to fourth quarter.

Okay. Well, guys keep up the great work. I'm looking forward to seeing the quarter-by-quarter progress.

Thank you, Howard.

[Operator Instructions] Thank you. At this time, there are no additional questions. I'll hand the floor back to Jim DeSocio for closing remarks.

Thank you, Rob. I’d like to say, Intellinetics is well positioned for continued success. This is the fourth year in a row, we've done very well. We have significant momentum, a strong competitive position growing markets, and a diverse set of solutions with ample cross-selling opportunities. Our business model structured around recurring revenue is working. We appreciate the continued support of our long-time shareholders, and aim to attract new investors as well by delivering strong and consistent financial results. Thank you for joining us today, and we look forward to speaking again on our next conference call. Thank you.

This will conclude today's conference. You may disconnect your lines at this time. And thank you for your participation.