Issuer Direct Corporation
Q1 2021 Earnings Call Transcript

Published: 10 May 2021

[Operator:]

Ladies and gentlemen, thank you for standing by, and welcome to the Issuer Direct Corporation’s First Quarter 2021 Earnings Conference Call. Today’s call will be conducted by the company’s Founder and Chief Executive Officer, Brian Balbirnie and its Chief Financial Officer, Steve Knerr. Before I turn the call over to Mr. Brian 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.

[Brian Balbirnie:]

Thank you, operator. Good afternoon, everyone. And thank you for joining us to discuss the company’s first quarter 2021 results. At the market close, we issued a press release announcing our results for the quarter. During today’s call, we will be referencing these results as well as talking a bit about fiscal 2021. For your convenience, a copy of the press release is now available on our Investor Relations section of our website and is also on our ACCESSWIRE newsroom for your reference during today’s call. Again, we are pleased with the quarterly results. We picked right up from our prior year success of 20% of year-over-year growth and ended first quarter with record revenues of $4,980,000, which translates into 24% year-over-year revenue growth. Steve will discuss this more in detail in a few minutes. We are all excited about the momentum and look forward for the remaining part of the year and delivering similar or greater results. Changing gears to customers, on a year-over-year basis, we saw a slight increase of 5% in our public company customers, totaling now 1,541 but where we continue to see our significant growth is with our private customers increasing 53% for the quarter, totaling 1,970. Our total customer counts now have reached over 3,500, steps closer to our 5,000 customer goal, something I will talk further about after Steve’s remarks. An interesting trend that we are seeing in our pipeline at this stage of the year is the number of mid-cap and greater customers interested in subscribing to our platform. This is an encouraging metric for us, for our public company growth and something we will continue to work on as we believe there is still strong opportunities for growth in this customer segment. Before Steve gets into the results for the quarter, I want to provide an update on the company’s repurchase plan. During the first quarter, by Board action, the sealing price of our repurchase plan was removed and we were able to complete the repurchase of 19,777 shares of our common stock at an average price of $22.89 for a total repurchase of $453,000, closing out the $2 million repurchase plan originally announced August 7, 2019 and increased on March 16, 2020. We are pleased we were able to complete this plan and retire a total of approximately 180,000 shares of our common stock. And as you would expect, any future repurchase plans will need to be approved by the company’s Board of Directors. However, management believes that as long as we continue to generate the cash flows, as we have historically, form our operations, we should maybe consider the future buyback of the plan.

[Steve Knerr:]

Thank you, Brian and good afternoon, everyone. As Brain mentioned, we got off to a great start with the first quarter of 2021 picking up right where we left off of 2020. Those sides of our business performed well, however, we are most encouraged by the growth in the newswire business and subscription sales made during the quarter. The investments we are making and our sales and marketing are paying off, now we intend to continue thing, while also increasing our spend in our products and technology. I will not highlight some of the results we achieved during the first quarter. Total revenue for the first quarter of 2021 was $4.980 million, an increase of $964,000 or 24% compared to just over $4 million for the same period of 2020. Our communications business led the growth increasing $779,000 or 32% to $3,187,000 or 64% of our total revenue. During the first quarter of 2020, communications revenue accounted for 60% of our total revenue. The increase in revenue was driven by our ACCESSWIRE brand and newswire, which not only drive stand-alone press release revenue but also new subscriptions for Platform id. ACCESSWIRE revenue increased 38% over the first quarter of 2020 due to an increase in volume, customer account and revenue per release as we continue to benefit from our e-commerce platform and spend on the digital marketing. We also continued to generate increase revenue from licenses of Platform id. For the first quarter, we signed 50 new contracts with annual contract value or ACV of $383,000 bringing our overall contracts to 386 with an ACV of over $3 million. This compares to 341 contracts with ACV of approximately $2.7 million at the beginning of 2021. Compliance revenue grew 12% or $185,000 during the first quarter of 2021 compared to the same period of 2020. This increase was due to an increase in revenue from our transfer agent services and print and proxy fulfillment services, which tend to fluctuate from quarter to quarter depending on corporate transactions, market activity in certain projects. Switching over to gross margin, our overall gross margin increased 30% or $823,000 to $3,586,000. Gross margin percentage was 72% for the first quarter of 2021 compared to 69% for the same quarter of last year. Gross margin from our communications business grew slightly from 72% in Q1 2020, 73% in the first quarter of 2021 due to additional scale in our ACCESSWIRE business. Gross margin percentage from our compliance business improved from 64% to 71% for the quarter due to the increase in transfer agent revenue on a relatively fixed cost base as well as a decrease in amortization of our compliance software and lower fulfillment cost associated with our legacy ARS business.

[Brian Balbirnie:]

Thank you, Steve. What a great quarter. As you highlighted, Q1 results is another record quarter in revenues, earnings and customer accounts. Momentum is a powerful thing and is extremely important right now as we are continuing to accelerate our business transformation of being a communications platform technology company. The entire team is excited on our growth, which we are seeing in the financial results and also in our pipeline, product development and business process improvements. I am proud of what we are achieving but as most of your know from past quarterly calls and conference presentations, I personally believe that the best is yet to come for Issuer Direct and we will continue to see further growth in our business as we round out our product offerings and bundles for the right product mixes for our growing customer base. Steve touched on new subscription sold for the quarter, a few minutes ago, closing in at 50 new subscriptions to end the quarter with 386 in total. I really think that we are well on our way to ending this year with 500 plus subscriptions. There are a few things that are really interesting about our subscription business in total. First, new deals being signed are no longer unlimited and the majority of our renewals have also resulted in this unlimited concept going away. Secondly, ARPUs have increased from approximately $6000 to just over $7600 a year from over the past year, closing in at our target of reaching $8000 per subscriber on an average revenue basis. As this continues to progress, we will be presented with the ability to adjust our revenue models closer to a combination of initial subscriptions coupled with usage-based billing. This will be a powerful combination providing further value to our growing customer base and also gives us the ability to see ARPU expansion as these values are experienced from our customers. Moving along in the business, our compliance business performed well for the period. We see our AGM business and stock transfer business has achieved better than anticipated results. We are optimistic that Q2 performs similarly which will be driven by our AGM businesses overall, particularly the need for virtual meeting that remain this year like last. We anticipate that this offering will continue throughout the year and into 2022, likely as a hybrid event but perhaps at slightly reduced subscription model. Conversely, in the back of the year, many of our compliance customers will be relying up on our teams to support their SEC mandated inline XBRL via both our compliance software and service delivery teams. This should result in increased customer spends by an estimated 25% as well as extended subscriptions through 2022 and beyond.

[Operator:]

Our first question comes from the line of Michael Grondahl - Northland Securities. Please proceed with your question.

[Michael Grondahl:]

Hey, thanks, guys, and congratulations on the continued progress. Brian, could you talk a little bit about what’s driving that 38% growth in ACCESSWIRE? Is it primarily all the private companies you’re adding using that service, just units? Just help us understand it a little bit better.

[Brian Balbirnie:]

Thanks, Mike. Nice to hear from you. Yeah, the ACCESSWIRE growth is broken into two categories. One, I think you just alluded to slightly in that our private company, customer growth has been increasing at a steady rate over the last several quarters sequentially, even perhaps maybe the last two years. We’re starting to see those customers begin to take advantage of add-on services with their baseline distribution where we’re seeing some growth there. And I think as we covered a little bit in the script, we’re also starting to see the effects of this non-unlimited subscription for our public company customers, where it’s almost a usage-based system where they commit to a certain amount of news distribution with their IR and PR needs with the rest of our subscription, and then they’re paying up for additional press releases and/or distribution throughout the year. So I think it’s a combination of both, as we continue to add new products, we think that that number is only going to continue to grow, as we have a bigger seat at the table with some of these mid cap and larger, as well as just North American larger SFP that we’ll be working with.

[Michael Grondahl:]

And in the 50 subscriptions you sold, which was a pretty big number for one quarter, a record if I’m right. But is there anything that sticks out there in terms of product that that’s picking up steam or selling better? What would you attribute the 50 to?

[Brian Balbirnie:]

Yeah, it’s heavily related to our communications focus strategically, as we’ve reestablished our revenue streams as being compliance, communications, give or take one or two. I think it was 45 subscriptions during the period were communications focused, five were a combination of the disclosure business, our compliance, business and communications. So the heavy focus for us strategically as a sales and marketing engine is to drive value into our communications product platform. And that’s why we talk so much about these new products and innovations that we’ve got coming there. And we -- you’re right, it is equal to a record for us. We have had quarters in the past where we’ve done that and we believe we can continue that number to grow even more. I think we’ve messaged that we’d like to be at 500 by the end of the year. I think we’re well on pace to do that. So I think do nothing but get better for us. But we should always anticipate that the majority of this will come from our communications business.

[Michael Grondahl:]

Got it. And then maybe lastly, in terms of Newsroom and Brand Asset Manager, is there anything you can share there on the pricing just so we kind of have a feel for it?

[Brian Balbirnie:]

Yeah, basic Newsroom will likely be about 2400 annually a year for a company. When they add Brand Asset Manager it will climb to high threes, almost 4000 a year. So we’re confident that we’re going to see our low-end subscription customers on the private company side that perhaps is averaging, say 4000 annual or year, that will quickly get their average spend back up to what is the norm for our public company business to try to normalize the two together. We wouldn’t necessarily see public companies taking advantage of newsroom as much as we believe the private customers will. Brand Asset Manager is actually going to be a great add-on product that we think that will be incrementally sold as much or more so than Newsroom itself. And that will start likely just about the $1,000 price point for the year to have that that asset library for them. So, those two products that we talked about them, prior to today’s call and in today’s call, we still have three to four other new products that we’ve talked about, the buy versus build scenario. And we’re going to continue to do our work on that. And we’re optimistic that when we think about a Burton-Taylor report that talks about the entire communications lifecycle, what products are necessary to scale to reach this multi-billion dollar market that we’ve got. We’re confident that we’re going to be able to introduce some of these additional products, as well beyond those two this year.

[Michael Grondahl:]

Got it. Got it. Thank you.

[Brian Balbirnie:]

Thank you, Mike.

[Operator:]

Thank you. Our next question comes from line of Brock Erwin with CleverInvesting. Please proceed with your question.

[Brock Erwin:]

Hi, guys. Thank you for taking my question. And congrats on a great quarter. It looks like the business is definitely firing on all cylinders. I just have a couple questions. First off, could you talk about employee hiring over the quarter? What kinds of hires did you make? How many did you make as well as your plans for the rest of the year in terms of hiring?

[Brian Balbirnie:]

So, it’s a good question, Brock, and thanks for joining me today and asking. Yeah, we have, I think -- as you all know, in prior quarters, meaning last year and the year before, heavily focused in our sales and marketing teams for growth, been focused in our news editorial teams, building bench strength there to be able to handle the scale that we’re starting to deliver. I think the encouraging thing for us now is we are close to approaching this 100-employee mark as we’re hiring key individuals in all departments now. And an area that we care a lot about as we think about client success and onboarding, beginning to build additional disciplines there. We made headcount hire in the prior quarter there, we’re looking to do that again, this quarter. Customer stickiness is important, right, selling is a wonderful thing, but keeping and retaining, as we all know, much cheaper to keep a customer. So we care a lot about that area. We’ve added ops headcount strength to handle volume in news distribution. We’ve added head count in sales. We will continue to add additional headcount in sales this quarter and next. We’re committed to continuing to do that. I think that as we think through the end of the year, we should wrap maybe at 112, 115 employees, as we continue to deliver upon our stated objectives. I think that hiring those folks in during a time of remoteness has been a little more challenging, probably takes us longer to get through the recruiting process and finding the right candidate, and ensuring that we spend extra time training, teaching and mentoring these folks. But it’s been as good or better than it’s been in prior time. So it’s been a great experience and we have a wonderful HR team and a recruiting team that definitely helps us through that and that’s something we didn’t have a couple of years ago. So it’s nice to rely upon professionals that can do that for us.

[Brock Erwin:]

Fantastic. Thank you for that answer. Okay, just one more question. You touched on it earlier a bit but I’m curious about the product research that you’ve done for your Newswire -- the Newswire product that you’re working on developing, but also the Brand Asset Manager? I’m just wondering, it sounds like from what you said, it might be more of a private company product. But can you kind of talk about maybe what a typical customer is looking for in that product? And in the research that you’ve done, what gets those potential customers excited about buying a product like this?

[Brian Balbirnie:]

Yeah, I’ll answer them independently because I think they are two distinct products that deserve the vocalization of it. Let’s start with the news room product and we all in the IR space come to expect this. When you run a press release, it delivers to Bloomberg, Dow Jones terminals, all the brokerage houses and all the newspapers and media and Associated Press. And because you’re a public company, you have an obligation to produce that news on your corporate website in your Investor Relations platform. And typically 90% of companies do a really good job, it happens in near real time. When you come down a step to private companies, they don’t necessarily have the infrastructure in place, the web presence in place, or the know-how to make that happen. So they invest a lot of time and money building a story, telling a story, distributing a news article and that’s it. And I as a potential customer of theirs or potential partner that wants to learn more about their company, you end up with their website at some point and you don’t find this news, it’s not there. The reality is, it’s too cumbersome for them to do. So building a platform that gives them the ability to distribute content on ACCESSWIRE, and it automatically shows up in their newsroom, and alerts the right media professionals at the right time is vital to them. So your comment Brock, that it will likely be -- the uptake in that product will likely come from our private customers by a 90% range, 10% in the public side, is for that reason. It’s almost the analogy of set it and forget it. They’re going to subscribe to something and it’s going to work, it’s going to deliver what they want, they don’t have to think about it and don’t have to tell somebody to do it. It happens for them. And as they build their storytelling process, they typically will have product images, and headshots and logos and brand standards guides. And these are things that the media looks for when they’re looking to cover a company or want to write a feature article on a company. And they’ll visit your website looking for that. So to your earlier comment, having a product manager be involved in the organization and we invested in hiring recruit for that, here a few months ago, was to bring that institutional knowledge to us. What did the top 10 newswire product or new newsroom products out there in the market have? What don’t they have? Who’s an industry leader? Who’s an innovator? And figure out all that, build that competitive matrix out and one thing we clearly found is the majority of them don’t have an asset library, right. And this brand asset managers we refer to it as, they tend to allow folks to use Dropbox as a place to store images. And so we want to bring that to life for our customers and call that as a separate product. We’re trying to look for areas of differentiation, so that when we do sit down at the table and a bake off against one of our viable competitors, we want differentiation in our product, not just our price and not just our customer service and all the other things. We really want to start to innovate to be that leader, so we can be less about price, less about we’re equal to them in distribution and more about innovation, and what we’re providing. So those are two, we’ve got several more kind of in the plans for us, but definitely having a product manager and building corporate strategy around that, it’s been very important to us this year.

[Brock Erwin:]

Awesome, great. Well, that sounds -- I’m excited to see you launch those new products in the rest of the year. That’s it for me. Thanks.

[Brian Balbirnie:]

Thank you, Brock.

[Operator:]

Thank you. There appear to be no further questions at this time. I’d like to turn the floor back over to management for closing comments.

[Brian Balbirnie:]

Erwin, thank you very much. Fantastic job, as always. We appreciate your hard work during this time of year. We know this is the second busiest day of earnings season. And so that goes without saying thank you to everybody else spending the time listening to our call today, talking with us and listening to what we’ve got planned in the future. We look forward to doing it again with you next quarter. In the meantime, we look forward to also visiting with the folks in follow ups and at the next virtual conference. Have a good day. Thank you.

[Operator:]

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day. Transcript Provided by