Q4 2023 Issuer Direct Corp Earnings Call

Presentation

Operator

And it is provided for informational purposes only.
With that said, the one, the only Mr. Bilbray one in Omaha?

Well, thanks, James. For those of you who don't know, Jamie, you see is the practical joke or at the office, if you can tell, always has a story to tell. And conversely is one of the most knowledgeable people in the industry and understands the world of compliance and public companies more than anybody.
I know with that said, Greetings, everyone, and thank you, James, for today's introduction. So happy you're able to do this for us today. 18 years is gone by. So very quickly, the business would not be the same without you, sir, as we have said before, we will introduce a new employee each quarter, the first quarter earnings call on May ninth. We will hear from another amazing ISDR. employee.
Now let's talk about the quarter and here we appreciate everyone joining us today to discuss our results for the period. Our press release, which is accessible on our newsroom, has just been released and provides key takeaways on our performance for the quarter and year end 2023. We are pleased with the fourth quarter results. Total revenue was up 6% year over year to $7.5 million, driven by our news distribution businesses, which both Steve and I will discuss throughout the call today.
We also delivered on earnings for the quarter. Adjusted EBITDA was up 5% to $1.1 million from EUR1 million last year. And our subscription business also grew 5% for the quarter. And our average price per release in our core news business has held steady. I will talk more about why this is important a bit later. We have and continue to be bullish on our communications platform, led by our news distribution brands, access wire and News Wire where we are gaining market share each month customers and further brand recognition as we move forward strategically, we know we had to spend a good bit of time in the back half of 2023, fine-tuning the product set, as we now know called Media Suite, a true SaaS reoccurring subscription business, something I will spend some time talking about here today on the call. But before we talk about these accolades and what we expect for 2024, I want to highlight some nice wins and accomplishments in 2023. This year, we did work for brands like Delta, Bausch Health, CELSIUS, AutoZone, who trust us with their Investor Relations earnings calls and news distribution. When we consider our entire customer base. It's absolute pleasure to work with the 11,000 plus customers around the world. When we look back at our history and the growth of our business over the periods. I can't help but be satisfied or accomplishments, proud of our teams and thankful to our shareholders and because of Axis, why on our acquisition of Newswire, see prior year revenues up 42%, but that's behind us now. And we are focused this year and for several years on transforming our business, continuing to grow customers and revenues and outpacing the industry and some important metrics like year-over-year volumes in news distribution and outpacing industry annual growth rates, something we feel confident that we've built and can do for years to come as always there's a lot more to talk about. So I will turn the call over to Steve to cover the fourth quarter and year end results.

Operator

Steve?

Thank you, Brian, and good afternoon, everyone. As Brian mentioned, quarterly and year-end results were primarily driven by our acquisition of newswire and growth in our access where these brands, which resulted in our press release revenue increasing 12% for the quarter, 75% for the full year.
I will now highlight some of the financial results we achieved during the fourth quarter and full year ended 2023. For the fourth quarter of 2023, we achieved revenues of $7.5 million, 6% increase from $7.1 million in Q4 2022. For the full year, total revenue was $33.4 million, a 42% increase from $23.5 million in 2020 to increase in the quarter and year to date revenue was driven by both our communications and compliance revenue stream. On the communications side, the increase is primarily related to the acquisition of these wire in November of 2022. We also achieved increased revenue and access wire, which increased 1% during the fourth quarter and 10% for the year compared to the same periods of the prior year. Partially offsetting these increases was a decrease in revenues from webcasting and events due to less demand of our virtual product as well as a large conference, which occurred last year, but did not occur in the current year during Q4 2023 and a full year of 2023. Communications revenue accounted for 75% and 73% of total revenue, respectively. The prior year communication revenue was 78% and 69% of total revenue from both Q4 and full year of 2022. Revenue from our compliance business increased 20% for the fourth quarter and 24% during the full year compared to the same periods of 2022 The increase was primarily related to revenue from our print and proxy fulfillment services due to an increase in both the number of projects and the average size of the project. Specifically a couple of large projects which occurred in the second quarter of 2023. We also experienced an increase in revenue from our transfer agent business due to an increase in market activity and corporate actions.
Changing gears to gross margin, our overall gross margin percentage remained consistent at 74% and 76% for the fourth quarter and full year of 2023 compared to the same periods of the prior year. Gross margins from our communications business were also consistent for the fourth quarter of 2023 compared to the same period of the prior year. However, on a year-to-date basis decreased 1%, primarily due to an increase in distribution costs as we continue to expand our reach and global footprint. Gross margins from our compliance business increased 4% for the fourth quarter and 3% for the full year of 2023 compared to the same periods of the prior year. This increase in gross margin percentage is primarily due to higher margins achieved on some of the larger print and proxy jobs, as well as the increase in transfer agent revenue.
Moving down to operating income and loss, we posted operating loss of $105,000 for the fourth quarter of 2023 compared to operating income of 44,000 during the fourth quarter of 2020. To the full year, operating income increased to $2.8 million from $2.7 million in 2022 for both periods presented operating income was impacted by an increase in operating expenses, primarily due to an increase in amortization expense attributed to intangible assets related to the newswire acquisition Additionally, we experienced increases in general and administrative expenses and product development expenses during both Q4 and a full year of 2023, as well as an increase in sales and marketing expenses for the full year of 2023.
General and administrative expenses increased 11% for the quarter and 28% year to date. The increase during the quarter is primarily related to an increase in bad debt expense for the year-to-date period, primarily due to additional cost to operate Newswire, along with increased stock compensation expense, employee related costs and bad debt expense. Sales and marketing costs decreased 3% for the quarter and increased 39% for the full year compared to the same periods of 2022. These increases are due to incremental costs associated with operating the newswire business as well as our continued investment in advertising, digital marketing spend and automation enhancement. Product development costs increased 16% and 95% for the quarter and full year compared to the same periods of 2022, which is directly attributed to the additional costs associated with operating newswire and the addition of NACTO., on a GAAP basis, we had a loss of $726,000 or $0.19 per diluted share compared to a net loss of 109,000 or $0.03 per diluted share during Q4 of 2022. Net income for the full year of 2023 was 766,000 or $0.2 per diluted share compared to $1.9 million or $0.52 per diluted share in 2022.
Looking at some non-GAAP metrics. Ebitda for the fourth quarter of 2023 was $234,000 or 3% of revenue compared to $589,000 or 8% of revenue during Q4 of 2020. For the full year of 2023, EBITDA was $5.4 million or 16% of revenue compared to $3.7 million or also 16% of revenue during 2022. Adjusted EBITDA for Q4 2023 was $1.1 million or 14% of revenue compared to $1 million or 14% of revenue during Q4 of 2022. For the full year of 2023, adjusted EBITDA was $7.7 million or 23% of revenue compared to $4.9 million or 21% of revenue for 2022. Non-gaap net income was 575,000 or $0.15 per diluted share for Q4 of 2023 compared to $665,000 or $0.18 per diluted share during Q4 of 2022. For the full year of 2023, non-GAAP net income was $4.9 million or $1.28 per diluted share compared to $3.5 million or $0.95 per diluted share in 2020.
To switching over to cash flow metrics, we just completed our 33rd consecutive quarter of positive cash flows from operations for the Company.
Cash flow from operations for Q4 of 2023 was $770,000 compared to just under 1 million for Q4 of 2022. The full year of 2022 cash flow from operations was 3.1 million compared to 4 million for the from the prior year. However, adjusted free cash flow was $687,000 for Q4 of 2023 compared to 2 million for Q4 of 2022 and 3.3 million for the full year in 2023 compared to 5.1 million in 2022.
I will now turn the call back to Brian, who will provide some updates on the business, our new products and everything else we have planned for 2024.

Brian.

Thank you, Steve. As we said before, customer growth is an important KPI for us. Total customers grew to 11,924, up from 8,218 last year. The total includes customers from newswire platform acquired in late 2022. This is a 45% year over year customer increase with some of the new things that we've planned this coming year. We feel confident that we can continue to see customers increase double digits year over year.
Moving along to subscriptions, we ended the quarter with 1,053 customers subscribing to our products with an average spend of 9,489, up from 1,002 subscribers last year or 86 hundred and 41. This is a 10% revenue expansion and 5% subscriber growth on a year-over-year basis. We continue to see mid-90 percent retention in our subscribing customers and believe as we commercialize our new medias, we will see further improvement here as well as expansion of our subscription business. Something that we do not talk about in our calls is about our customers of the almost 12,000 companies using our product and solutions. There are thousands that are under one year contracts or longer to use our new news platform with the same quantity of press releases for a defined term. We expect to continue to increase as customers are looking to obtain fixed cost agreements. And conversely, as we look to sell more solutions and products to our customer base one year or longer contracts help us forecast and build our backlog business each year. We continue to see advancements in the US, both in taking price as well as customer activity. Conversely, in Canada, we are seeing signs of new customer activity slowing slightly, not just in our results but in industry as a whole. So conversely, we are taking a one-time write-down of $300,000 in our Canadian install base, something we are working hard to ensure is not going to be repeat repeatable results this year, improving our credit terms, prepays and overall credit monitoring will prevent this from being the case moving forward.
For the fourth quarter, our collective news brands contributed to an increased market share of 14%, up from 11 in the prior quarter ended September, we have been heavily tracking volumes in North America, learning from the trend analysis, which we believe will help us accomplish several things. First, customer insight and usage to accurately predict the market size. Second, flesh out opportunities we see for tech enablement with large volume customers that could result in better than average gross margins. And third, leverage our brands. And we continue to move upmarket to a larger install base, typically owned by our larger incumbents. Also having a comprehensive solution also allows us to support customer needs across the entire communications and public relations ecosystem. As we talked about in the last couple of calls, the last 60 days has been a busy time for us whereby we released our new media suite into both access wire and newswire branded platforms. For those of you that don't know much about our Media Suite, please go to our website to learn more watch a video request a demo, if you wish, we'd really love to show it to you. Our teams have been able to put together what we think is a great public relations communications platform that includes media database, pitching monitoring as well as the existing media rooms reporting platforms and our news distribution offerings. We are excited to officially launch these products in a fully annual reoccurring revenue model beginning at $6,750 a year at entry point less than we mentioned on our last call. However, plans do go up in tiers from 6,007 thousand to just over $10,000, that a customer enterprise, which ranges from INR18,000. We will continue to learn the market needs and are building a backlog of features not available in the market. This will help us produce stickier subscribing customers that give us staying power and retention as well as brand loyalty in the market. It is early in the sales cycle for the Media Suite. We have been building a pipeline since January, demo-ing daily and early indications has yielded a limited number of subscribers about a dozen hundreds in the pipeline.
The progress to move to a our business is deliberate. As we spoke about earlier, we have 1,053 subscribers to our products I want to see the number increase significantly by the end of 2024 and be able to report to your ARR, retention, churn and dollar value retention on renewals and lifetime value as we mature our fall subscription business, our PR Optimizer, formerly map products. We performed well in the fourth quarter, driving another $200,000 in new ARR. This moved us to over 50 customers at the year end totaling 1.3 million in contract value. Our IR business, which includes our quarterly earnings call business and investor relations website ended the year with over 600 customers. Brands like Sherwin-Williams, all-bank, LifeStorage, O'Reilly Automotive, The Trade Desk, AutoZone, Bausch & Lomb, Kimberly-Clark and the national Guardian Life Trust, our teams and technologies to power their message to the investor community. These solutions experienced growth in 2023, and we can't wait to share some new brands coming this year already under contract we continue to believe our IR business will experience high single digit to low double digit growth in 2024. This is why we have invested significant upgrades in our infrastructure platform, tech and customer workloads and real-time editing and publishing components. Our compliance business, which includes our AGM, stock transfer and regulatory filing business, as well as our NYSE supported whistleblower platform ended the year with over 800 customers. Brands like loanDepot, Manchester, United fiber, DoorDash, Arlo, Ethan Allen Celsius and Royal business bank, as well as Smith & Wesson use our compliance products help keep them compliant with the SEC and the exchanges they're traded on our news business under both brands. Access via Newswire is where we have, and we'll see our biggest customer growth and collectively the majority of our overall revenues last year, thousands of customers tell their stories with our news distribution network brands like Madonna, Amdocs, MicroVision, Bosch health, right, local businesses in your community also worth mentioning via partnership of the world's largest brands telling us about their ESG news. We are confident in our news business, both from a growth perspective but also brands and global reach over the next several years.
With that said, we should consider what the growth looks like for us for the industry and what is realistic and where we see opportunity to outpace the industry. According to Burton, Taylor and Gartner, the PR business has grown 5% to 6% kegger over the last few years. We have far outpaced those numbers in our results. And like Steve said, we grew 12% year over year in the fourth quarter. We are optimistic going into 2024 that are year over year basis, we'll see continued double digit growth. Products like the Media Suite and pure optimizer will help drive utilization volumes, but we also believe we will see further lift in price over the years as we still have pricing leverage in the market. Steve did a good job laying out the numbers for the quarter and year. So I'm happy to pause at this point and open the call up for questions. But before we do, I'd like to reaffirm We remain confident in our business, our products and the markets we serve. Our brands continue to serve us well, and we look forward to sharing more updates with you next quarter. And operator, please go ahead.

Question and Answer Session

Certainly, everyone at this time be conducting a question and answer session. If you have any questions or comments, please press star one on your phone at this time. We do ask that while posing your question, please pick up your handset if listening on speakerphone to provide optimum sound quality. Once again, if you have any questions or comments, please press star one on your phone. Please hold while we poll for questions.
Your first question is coming from Mike Grondahl from Northland Capital. Your line is live.

Yes, hey, guys.

This is Luke on for Mike. I just wanted to touch a little deeper on the marketing strategy for the New Media Suite on just as far as it relates to acquiring new customers and then also getting existing customers to use the or the new product suite and then and how that kind of goes with I think last quarter you guys mentioned some sales hires too to help these efforts.

Operator

Yes, hey, look, this brand the Media Suite product began early marketing at the first week of the I think January fourth, right? The first time day back from the holiday began direct campaigns to prospects in our database that are not customers of access wire or news wire. And strategically, we began targeting certain profiles of customers within our current installed base with another series of marketing campaigns and videos teasing out something fleet was coming right? That was the tag line of the of the marketing platform campaign that they built, obviously the suite and that would be Media Suite to run the customer through a series of cadence of questions and what they're looking for ultimately to get to demo to take the marketing qualified leads and build pipeline to a sales qualified lead, and they've been doing that successfully under both brands. Both sales teams to your latter point sales teams did grow. We retracted certain profiles of sales side, individuals in the organization and built a new enterprise style sales team. Each one, having a thoughtfully 10 years plus experience in the industry have sold products like previous week before. So we're doing it both from an experience sales, direct sales channel and another marketing channel and to drive new inbound opportunities of both public and private customers.
Looking for components of the Media Suite ultimately settling in on the full platform. We think the lead quantities are coming in at a relatively good clip. The demos and the pipeline is building as we expected it so we're not seeing anything out of the norm today. So if you can start a product sale and generate hundreds of leads and qualify these folks and build pipelines that quickly it should shape up to be a good product launch for us this year.

If I add, it sounds like there's some good progress being made on that front. And then I guess just how do you see this impacting gross margins going forward with the new suite? And then there the shift to recurring revenue model is going to be kind of in line with historical margins? Or will we be seeing a shift over the years or years to come?

Operator

I mean, I think you have to look at this certain long term. I think short term, as we start to begin to bring meetings with customers into our install base and look at ARR, we likely won't see a significant impact to gross margins relative to the size, it will contribute to overall revenue once it gets to that point near the year end and into next year, we'll start to see gross margins climb in the communications segment of our business for obvious reasons that the product is on 80 plus percent gross margin product to deliver from side. I think you just you have to think about it in volume. Once it contributes enough to vote until the revenue number, it will then have an impact to gross margin.

And then I guess, how should we be thinking about cadence of new product launches going forward. Is there anything you can quantify for us as far as maybe through 2020 for any sort of flavor for what is what to expect from new product launches here.

Operator

We're going to look, we've got a product now that that's kind of sits right alongside of our development team that's matured significantly. And obviously, with this kind of product launch and the level of effort. We've done a tremendous job there. So building a product team alongside of it that's connected directly to sales feedback loop with marketing to really tried to keep our ear to the ground and listen, right? And we're not going to have a black box build anything that we just think a customer wants for innovating features. Now that customer feedback is coming from. We want to do exactly what the customer wants, give them something that the competitive landscape does not have. And so we're confident with AMI integrated into all these products and some of the ideas that we came away with over the last couple of days and workshops that we've done here on site are going to we're going to iterate feature sets more than we're going to release new product. So we're really focused on taking a new entrant products in other medias. We product and innovating that against the competitive landscape with customer feedback to get to a real premium product by the end of the year and into next year. And so that's going to be our focus. And that's not to say that we may not surprise everybody with a new product later in the year. But for today, that's what our development teams are focused on is to continue to iterate what we have right now.

Yes. No, that makes sense. And appreciate you guys taking the questions today and looking forward to see how some of these initiatives play out in 2024.
Great.

Thank you so much.

Thank you. Once again, everyone, if you have any questions or comments, please press star then one on your phone.
Your next question is coming from about a [khabbat Aslam] from Blair meal Capital Management. Your line is live, how they go.

And Brian, thanks for the thanks for taking the question.

Here.

I just wanted to ask about currently what you see in terms of the cash position right now. So you guys are at $5.7 million about I just wanted to get your take on the potential for forgiveness, current share price share buybacks this year?

Operator

Yes. We've been bullish on share buybacks in the past, like we've done several million of buybacks in our history and from a return of capital. We've also done dividends to shareholders in the past as well and partially been active along with others in the management team and directorship buying shares back from the book. I would tell you for today, we're likely going to continue to accumulate cash and invest in the business for growth. We will keep our eye on our share price, as we said in the event that we do need to act to do something, but we want to keep covenants with bank obligations and capital needs of the business and investments all parallel together along with opportunistically looking at share buybacks so that we don't have anything planned today, but that does suggest that we may not have something planned later in the year. But right now, we are focused on business execution and growth and investing in the business often.

Thanks, Brian. Looking forward to 2024 roughly and Thank you.

Thank you. That concludes our Q&A session. I will now hand the conference back to Issuer Direct CEO and Founder, Brian Berney for closing remarks.

Operator

Please go ahead, Matthew, thank you. As always, sir, we appreciate everybody taking the time today to discuss our Q4 and year-end numbers for 2023. It's only going to be a few weeks from now that we'll be talking on our Q1 numbers. We look forward to doing that with you, and we wish you all a good evening.

Thank you.

Thank you, everyone.
This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.