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.
As our cloud-based subscription business continues to mature, we expect the
Communications portion of our business to continue to increase over the next
several years, both in terms of overall revenue and as compared to the
Compliance portion of our business. Therefore, as noted below, for the year
ended
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, communications and compliance 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 customer's 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.
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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.
As noted above, in the past we have disclosed revenues in two main categories: (i) Platform and Technology and (ii) Services. However, to be more reflective of our strategy of primarily being a communications company, we have decided to re-categorize and 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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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 cost-effective, 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 to the traditional newswires 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 also continue to expand our distribution points, improve our targeting and enhance our analytics reporting. During 2020 we released a new e-commerce element to our ACCESSWIRE product, whereby customers can self-select their distribution and then register, upload their press release and tell their story in minutes without contacting a sales or operational employee.
We believe the above strategy will enable us to continue to add new customers in 2021 and beyond. 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. Currently, ACCESSWIRE is available within our Platform id. subscription, or as a stand-alone offering. During the first half of 2021, we began removing unlimited newswire subscriptions to preserve the per unit pricing of our newswire products. This change has decreased and will continue to decrease the number of active Platform id, subscriptions, however the majority of these customers remain active, buying packages of releases.
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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.
ACCESSWIRE revenues and customers have increased each year compared to the prior year, a trend we expect to continue over the next several years. A significant portion of the growth has been due to increased private company customers, through either direct sales, e-commerce or through partner and reseller relationships.
Newsroom
A natural expansion to our ACCESSWIRE and investor relations website business, is a corporate Newsroom, which we began developing this year and have recently brought to market at the beginning of the third quarter. 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 wishing to build
connections with media, journalists, its customers and if applicable the
investment community. According to a recent survey from
Newsroom page - a custom URL, self-publishing system for customers that automatically add ACCESSWIRE news to their newsroom as allows them the ability to add any other mention, article or post from the web to their newsroom. Customers can self-manage this platform and customize things like colors, font, logo, images, social integration, and contact and customer URLs from our platform.
Brand Asset Manager - a customizable library of images, video, 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 a newsroom in the market today. 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 customer's assets.
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.
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,
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. We expect this heightened demand for virtual offerings will continue for the majority of 2021, although, there can be no assurances this high demand will continue in the future.
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 all 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. We believe these analytics, which will be a component of our Insight and Analytics module, will increase the demand for our webcasting platform among the corporate issuer community.
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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. As a result of COVID-19, most companies have been holding meetings virtually over the past 18 months, which has increased demand for this product. There can be no assurance that this demand will continue after the end of the pandemic.
At the end of 2018, we released a new module to Platform id., centered around the professional conference organizer ("PCO"). This subscription offering is being licensed 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 significantly decreased numbers in the near future and possibly long-term as a result of COVID-19. Our professional conference and events software, which is available as a 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 PCOs that is not available elsewhere in the market. We believe entering this business expands our current Communications revenue base and assists in making Platform id. a platform of choice for investment banks, issuers and investors.
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
Toward the end of 2017, we completed upgrades to our disclosure reporting
product to include tagging functionality that meets newly 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
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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
During early 2020, we upgraded our webcasting and annual meeting platform to bring to market a virtual annual meeting solution. This solution provides our customers the ability to conduct their annual meetings in a fully virtual manner as was often required during 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.
By adding a component of our webcasting and events business, we were able to offer a complete annual meeting solution, which incorporated real-time voting. For perspective, during 2019, approximately 300 North American public companies opted for a virtual component to their annual meeting compared to an estimated 4,000+ public companies in 2020. In 2021 it is estimated the market decreased its virtual component needs to an estimated 3,000 public companies. We experienced a proportionate decrease in the demand for our virtual annual meetings similar to that of the market in general. 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. To address this we intend to repackage our offering into a self service "DIY" product in 2022, that we believe can capture a larger portion of the market as well as meet budgets of companies trying to get engagement from shareholders with both in-person and virtual options.
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.
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 and six months ended June 30,
2021 and 2020:
Three months ended Six months ended
June 30, June 30,
Revenue Streams 2021 2020 2021 2020
Communications
Revenue $ 3,510 $ 3,014 $ 6,697 $ 5,422
Gross margin $ 2,643 $ 2,246 $ 4,957 $ 3,975
Gross margin % 75 % 75 % 74 % 73 %
Compliance
Revenue $ 2,210 $ 1,870 $ 4,003 $ 3,478
Gross margin $ 1,597 $ 1,276 $ 2,869 $ 2,310
Gross margin % 72 % 68 % 72 % 66 %
Total
Revenue $ 5,720 $ 4,884 $ 10,700 $ 8,900
Gross margin $ 4,240 $ 3,522 $ 7,826 $ 6,285
Gross margin % 74 % 72 % 73 % 71 %
Revenues
Total revenue increased by
Communications revenue increased
Compliance revenue increased
No customers accounted for more than 10% of the revenues during the three and
six-month periods ended
Revenue Backlog
At
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Cost of Revenues and Gross Margin
Communications cost of revenues consists primarily of direct labor costs,
newswire distribution costs, teleconferencing costs and third-party licensing
costs. Compliance cost 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
increased by
Gross margin percentage from Communications revenue was 75% and 74% during the
three and six-month periods ended
Gross margins from our Compliance revenue increased to 72% during both the three
and six-month periods ended
Operating Expenses
General and Administrative Expense
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 22% and 25%
for the three and six-month periods ended
Sales and Marketing Expenses
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 21% during both
the three and six-month periods ended
Product Development Expenses
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 expenses increased
As a percentage of revenue, product development expenses were 4% and 5% for the
three and six-month periods ended
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Depreciation and Amortization
Depreciation and amortization expenses decreased
Interest income, net
Interest income, net, represents interest income on deposit and money market
accounts, as well as for the prior year, the non-cash interest associated with
the present value of the remaining anniversary payments of the
Income tax (benefit) expense
We recognized income tax expense of
Liquidity and Capital Resources
As of
Effective
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 prior year there was a delay 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. Since the COVID-19 pandemic began, we are seeing increased demand for virtual events using both our conference software and webcasting products, as customers are opting to hold virtual meetings. During the first and second quarter of 2020, we were able to pivot portions of our platform to specifically address COVID-19 business limitations. This resulted in a new virtual annual meeting product, which combines our webcasting and proxy voting technology together. Additionally, we also upgraded technology of our conference software product to allow conferences to go entirely virtual and hold one-on-one meetings with audio, video and sharing features.
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We believe these developments will assist us not only in delivering attractive solutions to the market, but also lead us into new opportunities during this changing and challenging environment. The extent to how long these shifts in demands will occur is uncertain at this time and could be longer than just 2020 and first part of 2021. However, we cannot make any assurances at this time that our product upgrades will be accepted by customers and revenue will be significant enough to offset losses in other aspects of our business 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 2021:
· Expanding our Communications products and adapt to this changing
environment,
· Growing through 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 among the middle, small and micro-cap markets, as well as private companies, as they seek to find better platforms and tools to disseminate and communicate their messages. Although this demand may decrease or shift in the near term as a result of COVID-19, we believe we have the product sets, platforms, capacity and ability to adapt during these changing times to meet their requirements.
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.
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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