Issuer Direct Corp
AMEX:ISDR
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
7.845
16
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Earnings Call Analysis
Summary
Q3-2023
In Q3 2023, Issuer Direct experienced remarkable growth with total revenue reaching $7.6 million, a 43% year-over-year increase, primarily due to its Communications business, which saw a 74% rise. The company's EBITDA also surged to $1.5 million, marking a 20% revenue margin. Despite a slight decline in compliance revenue, gross margin percentages remained consistent at 76-77%. Net income, however, dipped to $273,000 from $686,000 in Q3 2022. Adjusted EBITDA for the first nine months of 2023 was 26% of revenue, and non-GAAP net income per diluted share rose to $1.13. Looking forward, Issuer Direct plans to launch a new media suite priced between $10,000 to $18,000 annually, expecting to boost the number of subscribers significantly by the end of 2024, even as the compliance business shows signs of slowing.
You don't have any saved screeners yet
Good day, everyone, and welcome to the Issuer Direct's Third Quarter 2023 Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Dee Brown. Ma'am, the floor is yours.
Ladies and gentlemen, thank you for standing by, and welcome to the Issuer Direct Corporation Third Quarter 2023 Earnings Conference Call. My name is Dee Brown, Director of Human Resources here at Issuer Direct. I've been with the company for almost 6 years, and I'm happy to meet you all today. Like David did last quarter, this is our way of ensuring our shareholders get to know all of us here at Issuer Direct. We are both committed and excited to continue this each quarter.
With that said, it is my pleasure to introduce the company's Founder and Chief Executive Officer, Brian Balbirnie; and its Chief Financial Officer, Tim Pitoniak. Before I turn the call over to Mr. Balbirnie, I'd like to read you the company's abbreviated safe harbor statement. I'd like to remind you that statements made in this conference call concerning future revenues, results from operations, financial position, markets, economic conditions, product releases, partnerships and any other statements that may be construed as a prediction of future performance or events are forward-looking statements, which may involve known and unknown risks uncertainties and other factors, which may cause actual results to differ materially from those expressed or implied by such statements. Non-GAAP results will also be discussed on the call. The company believes the presentation of non-GAAP information provides useful supplementary data concerning the company's ongoing operations and is provided for informational purposes only.
With that said, Mr. Balbirnie?
Greetings, everyone, and thank you, Dee, for today's introduction. So happy you're able to do this for us today. Your tenure with us has produced so many improvements to our culture, our HR tools, processes and systems. Super cool for you to be doing this today and for your hard work on the hello, my name is [indiscernible] with David. As I said before, we will introduce new employees each quarter. I can't wait for the next quarter's call as well, where we'll have our longest-standing employee give his interim, Mr. James Michael, get ready, sir.
Now let's talk about the quarter. We appreciate everyone joining us today to discuss our third quarter results. Our press release, which is accessible in our newsroom has just been released and provides the key takeaways on our performance for the quarter. We are thrilled with the third quarter results. Today, total revenue was up 43% year-over-year to $7.6 million, driven by ACCESSWIRE and the Newswire acquisition. Tim will discuss this in detail shortly. We've also delivered solid performance on earnings for the quarter, something we spoke about in our last call and earlier this year. Adjusted EBITDA was up 45% to $1.8 million year-over-year. Our subscription business also grew 8% for the quarter, and our average prices per press release in our core news business has held steadily. And I will talk about why that's important a bit later. We have continued to be bullish in our communications platform led by ACCESSWIRE, news brands, we are gaining market share each month, customers and further brand recognition. We recognize that we still have a lot to do here, as I've said, and even though that we're in a challenging environment with budget cuts and economic uncertainty, we still have grown our core products and our new distribution, core earnings calls and IR website businesses, something we feel confident we will continue to do for years to come.
As always, there's a lot to talk about. I'll turn the call over to Tim to cover the third quarter highlights. Tim?
Thank you, Brian, and good afternoon, everyone. As Brian mentioned, we continue to deliver positive quarterly results in top line revenues, earnings and cash flows, not including the benefit from our Newswire acquisition. Our new distribution business has grown 10% year-to-date on a stand-alone basis, and as a result, has helped drive quarterly revenue. I will now highlight some of the results we've achieved during the third quarter. Total revenue for the third quarter of 2023 was $7.6 million, an increase of 43% compared to $5.3 million for the same period of 2022. For the 9 months ended September 30, 2023, total revenue was $25.8 million, an increase of 58% from $16.4 million for the same period of 2022. The increase for both periods was primarily driven by our Communications business, increasing 74% and 76% for the 3 and 9 months ended September 30, 2023, respectively. Communication revenue represents 80% and 72% of total revenue during the 3 and 9 months ended September 30, 2023, compared to 66% and 65% for the same periods of 2022. The increase in revenue was driven by the acquisition of Newswire, for which all revenue is included in the communication revenue.
For the first 9 months of 2023, we also generated increased revenue from our ACCESSWIRE business, which increased 10% compared to the same period of the prior year. The increases for these 3 and 9 months ended September 30, 2023, were partially offset by a decrease in webcasting and events revenue compared to the same period of the prior year. Compliance revenue decreased 17% and increased 25% during the 3 and 9 months ended September 30, 2023, respectively, compared to the same periods of 2022. The decrease in compliance revenue for the quarter is attributed to a decline in revenue from our transfer agent and print and proxy fulfillment services businesses due to a decrease in corporate activity and projects during the quarter. The year-to-date increase in compliance revenue is related to an increase in revenue from our print and proxy fulfillment services business due to a few significant transactions, which occurred during the first half of the year as well as an increase in revenue from our transfer agent service business due to an increase in corporate actions and directives during the first half of 2023.
Switching over to gross margin. Our overall gross margin percentage was 76% and 77% for the third quarter and first 9 months of 2023, respectively, compared to 77% for the same periods of 2022. Gross margins from our communications business were 75% and 77% and for the 3 and 9 months ended September 30, 2023, respectively, compared to 77% and 78% for the same period of 2022. The decrease in gross margin percentage for the quarter is primarily related to an increase in distribution costs as we continue to expand our reach and global footprint.
Moving to operating income. We posted operating income of $593,000 for Q3 of 2023 compared to $789,000 in Q3 of 2022. Operating income was $2.9 million for the first 9 months of 2023 compared to $2.6 million during the first 9 months of 2022. The decrease in quarterly operating income is primarily related to the additional amortization expense attributed to intangible assets acquired in the Newswire acquisition. The increase in year-to-date operating income is primarily due to an increase in revenue, partially offset by an increase in cost of revenues and operating expenses. General and administrative costs increased 23% and 35% during the third quarter and the first 9 months of 2023, respectively. The increase is primarily driven by additional expenses associated with cost to operate the Newswire business, employee-related expenses and stock compensation expense.
For the 9 months ended September 30, 2023, the increase is also related to onetime transaction costs, partially offset by a reduction in executive recruiting fees. Sales and marketing costs increased 49% for the third quarter and 62% for the first 9 months of 2023 compared to the same periods of 2022 due to the addition of the Newswire sales team. Product development cost increased 137% and 157% and during the 3 and 9 months ended September 30, 2023, compared to the same periods of 2022. The increase is directly attributed to additional costs associated with operating the Newswire business, as well as the hiring of our new Chief Technology Officer. It is also important to note that during the 3 and 9 months ended September 30, 2023, we capitalized $152,000 and $319,000, respectively, and costs related to building our new artificial intelligence component of our Newswire known as Almee as well as upgrades to our media database product.
On a GAAP basis, during Q3 of 2023, we generated net income of $273,000 or $0.07 per diluted share compared to $686,000 or $0.19 per diluted share during Q3 of 2022. Net income for the first 9 months of 2023 was $1.5 million or $0.39 per diluted share compared to $2 million or $0.55 per diluted share for the first 9 months of 2022. Net income for the 3 and 9 months ended September 30, 2023, were impacted by operating expense items discussed previously as well as additional interest expense associated with the Newswire acquisition. These increases were partially offset by income resulting from the change in the fair value of our interest rate swap and interest income. Additionally, the 9 months ended September 30, 2023, and was impacted by a payment to extinguish our note payable resulting from the Newswire transaction.
Looking to some non-GAAP metrics. EBITDA for the third quarter of 2023 was $1.5 million or [ 20% ] of revenue compared to $952,000 or 18% of revenue in Q3 of 2022. For the first 9 months of 2023, EBITDA was $5.1 million or 20% of revenue compared to $3.1 million or 19% of revenue during the first 9 months of 2022. Adjusted EBITDA for Q3 of 2023 was $1.8 million or 23% of revenue compared to $1.2 million or 23% of revenue for the same period of 2022. Adjusted EBITDA for the first 9 months of 2023 was $6.7 million or 26% of revenue compared to $3.9 million or 24% of revenue for the first 9 months of 2022. Non-GAAP net income for Q3 of 2023 was $1 million or $0.27 per diluted share compared to $978,000 or $0.27 per diluted share during the same period of 2022. Non-GAAP net income for the first 9 months of 2023 was $4.3 million or $1.13 per diluted share compared to $2.9 million or $0.77 per diluted share during the first 9 months of 2022.
Switching over to the balance sheet and cash flow statement, our deferred revenue balance, which is revenue we expect to recognize primarily over the next 12 months decreased to $5.2 million as of September 30, 2023, compared to $5.4 million as of December 31, 2022. The decrease in deferred revenue was driven by an opening balance sheet adjustment recorded during the period attributed to the Newswire acquisition. On the cash flow statement, we generated cash flow from operations of $287,000 and $2.3 million for the 3 and 9 months ended September 30, 2023, respectively, compared to $1.4 million and $3 million during the same period of 2022. Adjusted free cash flow was $127,000 or $2.6 million for the 3 and 9 months ended September 30, 2023, respectively, compared to $1.4 million and $3.1 million for the same period of 2022. Cash flows for the 3 months ended September 30, 2023, was negatively impacted by a year-over-year increase in tax payments of approximately $700,000.
I'll now hand it back over to Brian, who will provide some updates on the business, new products in the pipeline and everything else we have planned for the remainder of the year. Brian?
Thank you, Tim. As we have said before, our customer growth is an important KPI for us. Total customers grew to 12,171, up from 7.084 last year. This total includes customers that were acquired in the Newswire acquisition late last year. This is a 72% year-over-year customer growth. With some of the new things that we've planned this coming year, we feel confident that we can continue to see customer increases with the goal of seeing 20% plus growth by the end of 2024.
Moving along to subscriptions. So we ended the quarter with 1,050 customers subscribing to our products with an average spend of $9,447, which is up from [ $971 ] and/or $7.154 the prior year. This is a 32% revenue expansion and 8% customer growth on a year-over-year basis. Part of the increase was attributable to the success of our PR Optimizer product for the quarter. We have a busy fourth quarter with our new products that are in prelaunch marketing stage, and we are confident that these new products will further drive these metrics and continue to increase a clearer ARR model for us next year.
We still are seeing a good bit of headway here in the U.S. We continue to take share from the incumbents and win new business. And obviously, having a more comprehensive subscription platform gives our sales organization the ability to sell into a full total addressable market of the communications space. Conversely, in Canada, we are beginning to see signs of new customer activity slowing slightly, not just in our results, but the industry as a whole. As we talked about in prior quarters, this fourth quarter is the period in which we will release our full new media suite, a new subscription product that will include our media database, pitching products, monitoring as well as existing newsrooms, reporting platforms and our global news distribution offerings.
We are excited to offer and launch these products in a full annual reoccurring revenue model beginning at $10,000 to $12,000 a year. We anticipate having a few different plans that will go all the way up to $18,000 a year as we learn what the market needs further and meets customers' values and features that may not be available in the market. One example is our AI engine Almee. The solution has been fully integrated into both our storytelling process but also into our pitching processes and now are mentioning tools that scan millions of articles with our AI engine to examine content for our customers and report those mentions back to them in near real time. Our goal is to assist in a contextual way that we can anticipate journalists to engage, cover and bring brands to life, by making our customers aware of who these individuals are [ in ] our platform.
The progression here to move to an ARR business is deliberate. As we spoke about earlier, we have 1,050 subscribers to our products. I want to see the number increase significantly by the end of 2024 and be able to report to you our ARR, our retention and churn, our dollar value retention on renewals and lifetime values as we mature to a full subscription business. As I mentioned earlier, our peer optimizer formerly map product suite performed well for the quarter, driving an over $200,000 in new ARR from just a handful of customers. We are continuing to build momentum on this new product for us and are encouraged by the upgrades that we've made and the brand shift will continue to show results in our pipeline and the results in the coming quarters. But truth be told, it's early on in this product life cycle.
So in the year-end call, we will discuss a year-end review of all of our products, their performance and where we will guide for growth from each of our products going forward. Not to be fully repetitive, but our third quarter was a strong year-over-year growth quarter in revenues, consistent gross margins, customer growth and sustained subscribers in the most important product in our product lineup. We could not be more pleased with the progress that we're making and look forward to what is shaping up to be an amazing year for Issuer Direct.
As Tim and I both mentioned, revenues for the quarter were $7.6 million, up year-over-year, mostly because of the Newswire acquisition. You will see in our compliance business, it did slow down for the quarter, something I have said this year would occur and had not until this recent quarter. The decrease is driven by onetime projects moving as well as capital markets activity being significantly more challenging than in quarters past. We do anticipate that this business unit to be soft for the fourth quarter and into 2024 as it is our belief the numbers of deals being financed and overall corporate actions work is continuing to weaken. With that said, if we benefit from many of the onetime projects, we will see our compliance business top line revenues grow for that particular quarter. Conversely, our news distribution business drove $5.3 million in revenue for the quarter, 87% of our communications business and 70% of our entire business for the quarter came from our news platforms, which has more than doubled the priority of $2.6 million. We are seeing industry volumes flat. But however, we continue to see growth both in volumes as well as revenues, which is our ACCESSWIRE business was up 9% for the quarter.
As always, it was nice spending time with you today and discussing the results for the quarter. We look forward to talking with you on our follow-up calls. We remain confident in the business so much so that we are expanding our sales organization to capitalize on the opportunities that we see next year, both in our new products, but also in our new media suite coming to market. Our brands continue to serve us well in the market, and we look forward to sharing more updates with you next quarter.
Operator, can we please begin the question-and-answer period of the call.
[Operator Instructions] Your first question is coming from [ Mike Pronto ] from Northland Securities.
This is Luke on for Mike. Just wanted to touch quick on the new product pipeline. -- sort of how you see that playing out here into 2024. I know we'll probably get a better update on it next earnings call. But just trying to think of of understanding. So is this going to be all of these products coming to market at once, and then it will be kind of customers will get to pick and choose what they want to include in their bundle, and that will affect their pricing or sort of kind of how this is being launched.
Yes. Luke, this is Brian. It's a great question. The Media Suite product is going to be launched in 3 different variations. There will be 1 that will include a media database and pitching solution. That particular product suite we'll sit around the entry points that will be discussed earlier in today's call, and that will be focused on customers that are doing between 3 and 25 press releases currently with us today. As a way to increase their annual spend and moving them more towards an ARR type of solution. The other options are going to be the media database pitching monitoring product, along with a news room and their news distribution included in that. And so you maybe think about the latter 2 options being a basic and pro model or some sort of premium version that will scale up to the higher number we discussed of [ $18,000 ].
And what that really means, the 2 differences of the latter 2 plans will be additional ways to pitch additional press releases, more robust newsrooms, more customizations on the platform, assisted media targeting compared to maybe more of another solution. So this product is perfectly aligned with the customers that would not be a candidate to buy a PR Optimizer product from us which are looking -- those are the firms looking for us to build strategy, right content, calendaring and do earn media outreach for them. This solution is geared towards companies have the discipline internally to do it themselves, they want those solutions all wrapped up into 1.
Okay. Got it. And then as far as Almee going in with this product suite, is that -- is the pricing of Almee going to be baked into these offerings? Or is that something that would be an additional cost if that wants to be included? Or.
Yes. I think the way the AI world is today is that you have to expect that it's going to be part of a solution, there's no additional add-on. And so we released it on our news platform earlier this year as a way for customers to help build brand totality on their messaging and then have the ability to optimize from there. We've done the same with pitching and we're doing it with monitoring of articles. Our price point would include it. Correct.
Okay. Got it. And then what's the strategy behind growing the customer base here to that 20% growth by 2024 that you had mentioned? Or kind of how do you bridge that gap?
Yes. It's actually quite simple, right? We've -- as we've talked about for the last couple of years, our new distribution business continues to grow and outpace the market in growth and percentage of market but we are also only dealing with customers that can only buy press releases from us. And all the public companies tend to utilize our IR platforms and our earnings call platforms like we're doing on today's call, the larger market opportunity for us that TAM sits in the private company marketplace and those customers are looking for media database, the analytics and pitching products that we're going to be bringing to market here. So we're going to see significant customer growth as a result of having those additional products that allow us to seat at the table with the incumbents for longer when we're going to bake off with customers and our RFPs and everything else to actually have the entire suite that customers are looking for.
Looking forward to hearing some updates about some new products getting launched here.
[Operator Instructions] Thank you. That concludes our Q&A session. I'll now hand the conference back to CEO and Founder, Brian Balbirnie for closing remarks. Please go ahead.
Matthew, thank you. We appreciate the help as always, and we appreciate everybody spending time with us today and listening today's third quarter earnings call. We look forward to the follow-up as we do normally. We're excited to remain part of the year and beyond, and we look forward to you all being a part of Issuer Direct. Thank you so much.
Thank you, everyone. This concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.