ISSUER DIRECT CORPORATION The discussion of the financial condition and results of operations of the
Company set forth below should be read in conjunction with the consolidated
financial statements and related notes thereto included elsewhere in this
Form10-Q. This Form10-Q contains forward-looking statements that involve risks
and uncertainties. The statements contained in this Form10-Q that are not purely
historical are forward-looking statements within the meaning of Section 27a of
the Securities Act and Section 21e of the Exchange Act. When used in this
Form10-Q, or in the documents incorporated by reference into this Form 10-Q, the
words "anticipate," "believe," "estimate," "intend" and "expect" and similar
expressions are intended to identify such forward-looking statements. Such
forward-looking statements include, without limitation, the statements regarding
the Company's strategy, future sales, future expenses, future liquidity and
capital resources. All forward-looking statements in this Form10-Q are based
upon information available to the Company on the date of this Form10-Q, and the
Company assumes no obligation to update any such forward-looking statements. The
Company's actual results could differ materially from those discussed in this
Form10-Q for many reasons, including the impact of the COVID-19 pandemic.
Factors that could cause or contribute to such differences ("Cautionary
Statements") include, but are not limited to, those discussed in Item 1.
Business - "Risk Factors" and elsewhere in the Company's Annual Report on
Form10-K for the year ended
Overview
We announce material financial information to our investors using our investor
relations website,
We are a premier provider of communications and compliance technology solutions that are designed to help organizations tell their stories globally. Our principal platform, Platform id.™, empowers users by thoughtfully integrating the most relevant tools, technologies and products, thus eliminating the complexity associated with producing and distributing their business communications and financial information. Platform id. efficiently and effectively helps our customers manage their events when seeking to distribute their messaging to key constituents, investors, markets and regulatory systems around the globe. Platform id. consists of several related but distinct Communications and Compliance modules that companies utilize every quarter.
We disclose our revenues in the following two main categories: (i) Communications and (ii) Compliance. Set forth below is an infographic depicting the products included in each of these two main categories we provide today:
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Over the next several years, we expect the Communications portion of our business to increase, both in terms of overall revenue and as compared to the Compliance portion of our business. Therefore, we plan to continue to invest in our Platform id. communications offerings as well as additional offerings that we intend to incorporate into our Communications product lineup. Within most of our target markets, customers require several individual services and/or software providers to meet their investor relations and communications needs. We believe Platform id. can address all these needs in a single, secure, cloud-based platform - one that offers a customer control, increases efficiencies, demonstrates clear value and, most importantly, delivers consistent and compliant messaging from one centralized platform.
We work with a diverse customer base, which includes not only corporate issuers and private companies, but also investment banks, professional firms, such as investor relations and public relations firms, as well as the accounting and legal communities. Our customers and their service providers utilize Platform id. and related solutions from document creation all the way to dissemination to regulatory bodies, news outlets, financial platforms, and our customers' shareholders. Private companies primarily use our news distribution and webcasting products and services to disseminate their message globally. Platform id.'s intelligent subscription platform guides thousands of customers through the process of communicating their message to a large audience.
We also work with several select stock exchanges by making available certain parts of our platform under agreements to integrate our offerings within their products. We believe such partnerships will continue to yield increased exposure to a targeted customer base that could impact our revenue and overall brand in the market.
Communications
Our Communications platform consists of our ACCESSWIRE branded newswire, our webcasting and events business, professional conference and events software, as well as our investor relations website technology. These products are sold as the leading part of our Platform id. subscription, as well as individually to customers around the globe and are further described below.
ACCESSWIRE
Our press release offering, which is marketed under the brand ACCESSWIRE, is a news dissemination and media outreach service. The ACCESSWIRE product offering focuses on press release distribution for both private and public companies globally. We believe ACCESSWIRE is becoming a competitive alternative in the newswire industry because we have been able to use our technological advancements to allow customers to self-edit releases or use our editorial staff as desired to edit releases. We continue to expand our distribution points, improve our targeting and enhance our analytics reporting. We also offer an e-commerce element to our ACCESSWIRE product, whereby customers can self-select their distribution, register, and then upload their press release for editorial review in minutes. We believe these enhancements have helped lead to an increase in ACCESSWIRE revenues and customers each year compared to the prior year, a trend we expect to continue over the next several years. We have also been able to maintain high gross margins while providing our customers flexible pricing, with options to pay per release or enter longer-term subscriptions for a designated package of releases.
Like other newswires globally, ACCESSWIRE is dependent upon several key partners for its news distribution. Disruption in any of our partnerships could have a materially adverse impact on ACCESSWIRE and our overall business.
Newsroom
A natural expansion to our ACCESSWIRE and investor relations website business is a corporate Newsroom, which we began developing last year and brought to market during the middle of the third quarter of 2021. This product offering can be an add-on to any customer's ACCESSWIRE or Platform id. account. The Newsroom suite includes a custom newsroom page builder, a brand asset manager and contact manager.
Our Newsroom suite addresses the needs of our customers looking to build
connections with media, journalists, customers and if applicable the investment
community. According to a survey from
Newsroom page - a custom URL, self-publishing system for customers that automatically adds ACCESSWIRE news to their newsroom and allows them the ability to add any other mention, article or post from the internet to their newsroom. Customers can self-manage this platform to customize colors, font, logo, images, social integration, and contact and customer URLs.
Brand Asset Manager - a customizable library of images, video and press kits, which can be shared both privately and publicly, as well as integrated into the ACCESSWIRE editor for easy access of customers' high- resolution images. Brand Asset Manager is one of the first media file managers built into the press release creation process. All assets are tagged to give our customers analytics for both views and downloads. Subsequent versions of this feature will allow for greater analytics as engagement occurs with our customers' assets.
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Contact Manager - a technology that allows our customers to provide their audiences the ability to quickly subscribe to alerts or notifications of a particular brand. Customers will have the ability to deliver their stories automatically or time based. Engagement and delivery reports will also be available to customers directly from their dashboard.
Webcasting & Events
Our webcasting and events business is comprised of our earnings call webcasting solutions and our virtual meeting and events software (such as annual meetings, deal/non-deal road shows, analyst days and shareholder days). The demand for these products with a virtual component was at an all-time high for us in 2020 in large part due to the COVID-19 pandemic. The industry overall has begun to see a reduction in the number of virtual events, specifically annual meetings and deal/non-deal roadshows, as customers are relying on internal enterprise solutions or are returning to pre-pandemic travel and in-person meetings, reducing the need for a virtual component.
Traditional earnings calls and webcasts are a highly competitive market with the
majority of the business being driven from practitioners in investor relations
and communications firms. We estimate there are approximately 5,000 companies in
Additionally, as a commitment to broadening the reach of our webcast platform, we broadcast live additional companies' earnings events, whether they are conducted on our platform or not, within our shareholder outreach module, which helps drive new audiences and give companies the ability to view their analytics and engagement of each event. During the first half of 2021, we released the first version of this real-time engagement and analytics dashboard to our customers subscribing to Platform id.
Our VisualWebcaster Platform ("VWP") is a leading cloud-based webcast, webinar and virtual meeting platform that delivers live and on-demand streaming of events to audiences of all sizes. VWP allows customers to create, produce and deliver events, which we feel has significantly strengthened our webcasting product and Platform id. offering. The VWP technology gives us the ability to host thousands of webcasts each year, expanding and diversifying our webcast business from our historical earnings-based events to include any type of virtual event. As we expand our platform, it is vital for us to have solutions that service both our core public companies but also a growing segment of private customers.
Our professional conference and events software is a subscription offering we currently license to investor conference organizers, which in the aggregate we believe held an estimated 1,000 plus events a year prior to 2020. This number significantly decreased in 2020 and is expected to remain at decreased levels in the near future and possibly long-term as a result of COVID-19. This software, which is also available as a native mobile app, offers organizers, issuers and investors the ability to register, request and approve one-on-one meetings, manage schedules, perform event promotion and sponsorship, print attendee badges and manage lodging. This cloud-based product can be used in a virtual or in person conference setting and is integrated within Platform id. to enhance our Communications module subscription offerings of newswire, newsrooms, webcasting and shareholder targeting. We believe this integration gives us a unique offering for professional conference organizers that is not available elsewhere in the market. We believe this software helps make Platform id. a platform of choice for investment banks, issuers and investors.
Investor Relations Websites
Our investor relations content network is another component of Platform id.,
which is used to create the investor relations tab of a company's website. This
investor relations content network is a robust series of data feeds including
news feeds, stock feeds, fundamentals, regulatory filings, corporate governance
and many other components which are aggregated from most of the major exchanges
and news distribution outlets around the world. Customers can subscribe to one
or more of these data feeds or as a component of a fully designed and hosted
website for pre-IPO companies,
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Compliance
Our Compliance offerings consist of our disclosure software for financial reporting, stock transfer services, and related annual meeting, print and shareholder distribution services. Some of these products are sold as part of a Platform id. subscription as well as individually to customers around the globe.
Platform id.'s disclosure reporting module is a document conversion, editing and
filing offering which is designed for reporting companies and professionals
seeking to insource the document drafting, editing and filing processes to the
Our Inline XBRL (Inline Extensible Business Reporting Language or "iXBRL")
product now includes upgrades that meet mandated
Whistleblower Hotline
Our Whistleblower hotline is an add-on product within Platform id. This system
delivers secure notifications and basic incident workflow management processes
that align with a company's corporate governance whistleblower policy. As a
supported and subsidized bundle product of the
Stock Transfer Module
A valued subscription add-on in our Platform id. offering is the ability for our customers to gain access to real-time information about their shareholders, stock ledgers and reports and to issue new shares from our cloud-based stock transfer module. Managing the capitalization table of a public company or pre-IPO company is a cornerstone of corporate governance and transparency, and as such companies and community banks have chosen us to assist with their stock transfer needs, including bond offerings and dividend management. This is an industry which has experienced declining overall revenues as it was affected by the replacement of paper certificates with digital certificates. However, we have been focused on selling subscriptions of the stock transfer component of our platform, allowing customers to gain access to our cloud-based system in order to move shares or query shareholders, which we believe has resulted in a more efficient process for both our customers and us.
Annual Meeting / Proxy Voting Platform
Our proxy module is marketed as a fully integrated, real-time voting platform for our customers and their shareholders of record. This module is utilized for every annual meeting or special meeting we manage for our customers and offers both full-set mailing and notice of internet availability options.
This module has been incorporated within our webcasting offering to enable our customers the ability to conduct their annual meetings in-person or fully virtual, which has often been required since the COVID-19 pandemic. Our solution incorporates shareholder and guest registration, voting integration, real-time statistics on attendance, audio video and presentation features as well as fully managed meeting managers and inspector of elections. Although we believe a virtual component to an annual meeting is both a benefit to all shareholders and a corporate governance advantage, there can be no assurances this product has longevity in the market.
Shareholder Distribution
Over the past few years, we have worked on refining the model of digital
distribution of our customers' message to the investment community and beyond.
This was accomplished by integrating our shareholder outreach module, Investor
Network, into and with Platform id. Most of the customers subscribing to this
module today are historical
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Results of Operations
Comparison of results of operations for the three months ended March 31, 2022
and 2021 (in 000's):
Revenue 2022 2021
Communications
Revenue $ 3,383 $ 3,187
Gross margin $ 2,622 $ 2,314
Gross margin % 78 % 73 %
Compliance
Revenue 1,905 1,793
Gross margin 1,434 1,272
Gross margin % 75 % 71 %
Total
Revenue $ 5,288 $ 4,980
Gross margin $ 4,056 $ 3,586
Gross margin % 77 % 72 %
Revenues
Total revenue increased by
Communications revenue increased
Compliance revenue increased
2022 Deferred revenue
As of
Cost of revenues
Communications cost of revenues consists primarily of direct labor costs,
newswire distribution costs, teleconferencing costs and third-party licensing
costs. Compliance and other costs of revenue consists primarily of direct labor
costs, warehousing, logistics, print production materials, postage, and
amortization of capitalized software costs related to our disclosure software.
Cost of revenues decreased by
Cost of revenues associated with our Communications revenue decreased
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Cost of revenues associated with our Compliance revenue decreased
General and administrative
General and administrative expenses consist primarily of salaries, bonuses,
stock-based compensation, insurance, fees for professional services, general
corporate expenses (including bad debt expense) and facility and equipment
expenses. General and administrative expenses were
As a percentage of revenue, General and administrative expenses were 32% for the
three months ended
Sales and marketing
Sales and marketing expenses consist primarily of salaries, stock-based
compensation, sales commissions, advertising expenses, tradeshow expenses and
other marketing expenses. Sales and marketing expenses were
As a percentage of revenue, Sales and marketing expenses were 24% for the three
months ended
Product development
Product development expenses consist primarily of salaries, stock-based
compensation, bonuses and licenses to develop new products and technology to
complement and/or enhance Platform id. Product development costs increased
As a percentage of revenue, Product development expenses were 5% for the three
months ended
Income taxes
We recognized income tax expense of
Liquidity and capital resources
As of
Effective
Disclosure about Off-Balance Sheet Arrangements
We do not have any transactions, agreements or other contractual arrangements that constitute off-balance sheet arrangements.
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Outlook
The following statements and certain statements made elsewhere in this document are based upon current expectations. These statements are forward looking and are subject to factors that could cause actual results to differ materially from those suggested here, including, without limitation, demand for and acceptance of our services, new developments, competition and general economic or market conditions, particularly in the domestic and international capital markets. Refer also to the Cautionary Statement Concerning Forward Looking Statements included in this report.
While it is unknown how long current conditions resulting from the COVID-19
pandemic will last, including whether a worldwide resurgence will occur,
variants of the virus will become more impactful or vaccines will be completely
effective, we could experience a material disruption of our employees and
operations, a decline in revenue, a decline in value of our assets,
deterioration of our customer base and the inability of our customers to pay for
subscriptions or services provided. To date, we have seen both positive and
negative impacts to our business. Physical, in-person conferences have been
delayed and in the past there have been delays in transactions processed by the
Overall, the demand for our platforms and services continues to be stable in a majority of the segments we serve. The success of our Communications offering has been led by our ACCESSWIRE branded newswire, for which we believe we will continue to see increased demand throughout 2022 and beyond. Although we experienced a decline in demand for our webcasting and events business since 2020, we believe we are well-positioned in this market with our ability to hold both in-person and virtual events using both our conference software and webcasting products. We believe this allows us to not only deliver attractive solutions to the market but may also lead us into new opportunities during this changing and challenging environment. The COVID-19 pandemic has caused shifts in demands for these products, and we are uncertain at this time if these shifts will continue and cannot make any assurances at this time that our products will be accepted by customers in the long-term.
The transition to a platform subscription model has been and will continue to be key for our long-term sustainable growth. We will also continue to focus on the following key strategic initiatives during the remainder of 2022:
· Expanding our Communications products and adapting to this changing
industry,
· Evaluating and completing acquisitions in areas of strategic focus,
· Expanding our Communications sales and marketing teams and digital
marketing strategy,
· Expanding customer base,
· Expanding our newswire distribution,
· Investing in technology advancements and upgrades,
· Generating profitable sustainable growth
· Generating cash flows from operations.
We believe there is significant demand for our products around the world, led by our ACCESSWIRE newswire brand, as companies seek to find better platforms and tools to disseminate and communicate their messages in a more efficient and collaborative way.
We have invested and will continue to invest in our product sets, platforms and intellectual property development via internal development and acquisitions. Acquisitions remain a core part of our strategy and we believe acquisitions are key to enhancing our overall offerings in the market and are necessary to keep our competitive advantages and facilitate the next round of growth that management believes it can achieve. If we are successful in this effort, we believe we can further increase our market share and revenues per user as we move forward.
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Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
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