ACCESS Newswire Inc (ACCS) 2020 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Issuer Direct Corporation Fourth Quarter and Year Ended 2020 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.

Non-GAAP results will also be discussed on the call. The company believes the presentation of non-GAAP information provides useful supplementary data concerning the company's ongoing operations and is provided for informational purposes only.

With that said, Mr. Balbirnie?

Thank you, operator. Good afternoon, everyone, and thank you for joining us to discuss the company's fourth quarter and year-end 2020 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.

We are pleased with both our quarter and year-end results in so many ways. Specifically, fourth quarter revenues were up 20% year-over-year, which also drove significant increases in operating income and EBITDA. Additionally, with the strong performance in the fourth quarter, we were able to deliver a record year in revenues of $18,525,000, up 14% year-over-year. And total customers grew to 3,226, up 24% from the prior year. And lastly, several of our technology advancements to help drive demand for our offerings, specifically in the second half of the year.

Before I turn the call over to Steve, I want to say a big thank you to the almost 100 employees at Issuer Direct. These results would not be possible without your hard work, your customer first approach and your dedication to our strategy of being an industry-leading communications company. Our customers, thank you, our shareholders, thank you. And I especially could not have done it without you. Thank you.

Steve, take us through the numbers. And perhaps when you're done, we can spend a little time talking about what we have in-store for 2021. Steve?

Thank you, Brian, and good afternoon, everyone. As Brian mentioned, the fourth quarter and full year of 2020, we're successful in so many ways. We are extremely pleased with our team and the results we achieved together. As we have talked about, we had record revenues, EBITDA, customer accounts and cash flows from operations throughout the year. We are committed to posting new record results in 2021 and beyond. We have good momentum with our sales and marketing teams and new product upgrades and enhancements planned to help us achieve such results.

Now I will highlight some of the results for the fourth quarter and full year of 2020. Total revenue for the fourth quarter of 2020 was $4,744,000, an increase of $785,000 or 20% compared with just under $4 million in the same period of 2019. For the full year of 2020, revenue totaled $18.5 million, an increase of 14% or $2.2 million for the full year of 2019.

As you may have read in the earnings release, and we'll see in our 10-K, we have reclassified our categorization of revenue from platform and technology and services to communications and compliance. This is more of a product-focused categorization as opposed to the method of delivery of the products as we had before. Communications revenue group's revenue from ACCESSWIRE, webcasting and events, which includes conferences by our websites and communications subscriptions of Platform id. The growth in revenue for the quarter and full year was driven by the growth of our communications products.

Communications revenue increased $759,000 or 32% and $2,623,000 or 28% for the 3 months and full year ended December 31, 2020, compared to the same periods of the prior year. This increase is due to the shifted enhancements we made to our virtual products during the first half of the year, specifically with our webcasting and conference software products and increased demand for newswire and overall subscriptions to Platform id.

Stand-alone ACCESSWIRE revenue continues to increase as it increased 29% and 17% for the 3 and 12-month periods ended December 31, 2020, compared to the same period of last year. As with last quarter, the increase was due to both an increase in customers and an increase in revenue per release. So we continue to benefit from our digital marketing and e-commerce platform that we launched during the year.

Lastly, we continue to generate increased revenue from licenses of Platform id. During the fourth quarter, we signed 32 new contracts with an annual contract value, or ACV, of $241,000, bringing our overall contracts to 341 with an ACV of just under $2.7 million. This compares to 255 contracts with ACV of approximately $2 million at the beginning of 2020. As a percentage of overall revenue, communications revenue increased 65% for the quarter, 64% for the year compared to 59% and 57% for the same period of 2019.

Compliance revenue, which consists of our disclosure, services and software, transfer agent services and software, whistleblower software and investor network services as well as our print and proxy fulfillment services increased $26,000 or 2% for the quarter and decreased $392,000 or 6% for the full year of 2020 compared to the same periods of the prior year. The increase for the quarter was due to an increase in print and proxy fulfillment revenue due to an increase in the size and number of projects during the quarter. The decrease for the full year is due to continued attrition in our ARS and investor network customers, which we have spoken about in past quarters and a decrease in transfer agent revenue due to a shift from paper-based processing to electronic processing of company and shareholder directives. These 2 decreases were partially offset by an increase in print and proxy fulfillment services for the year.

Moving on to gross margin. Our overall gross margin percentage was 70% and 71% for the 3 months and full year ended December 31, 2020, compared to 67% and 69% for the same periods of the prior year. The increase in gross margin was led by expanded margins in our communications products, which reported gross margin percentage of 73% for the fourth quarter and full year of 2020 compared to 70% and 72% for both periods of 2019. The increase was due to scale in our ACCESSWIRE and Virtual Events business as a higher revenue on a relatively fixed cost structure and the higher margins. Gross margin percentage from our compliance business also improved from 63% to 64% for the quarter and 65% to 66% for the full year of 2020.

Continuing through the income statement, our operating income was $369,000 for the fourth quarter and $2.7 million for the full year of 2020, compared to $17,000 and $474,000 during the same periods of the prior year. For the fourth quarter, the increase was due to an increase in gross margin, partially offset by an increase in general and administrative expenses due to a onetime accrual of $350,000 recorded in the fourth quarter regarding sales and use tax compliance.

As a result of our growing customer base, transition from a service-based company to a cloud-based platform company, and the complex economic nexus provisions of various states, we completed an assessment of our sales and use tax position during the year. As a result, we recorded a onetime estimate of our current and historical state sales and use tax liabilities of approximately $350,000 in the fourth quarter and full year December 31, 2020.

The increase in operating income for the full year of 2020 was due to an increase in gross margin as well as a decrease in operating expenses, primarily due to a decrease in product development expenses due to lower headcount and a decrease in amortization expenses due to intangible assets, which became fully amortized during the year.

As Brian will discuss, product and development expenses are expected to increase in 2021 as we continue to develop and roll out our product upgrades and new products throughout the year. These decreases in product development and amortization were offset by an increase in sales and marketing expenses, which increased 7% for the year due to an increase in personnel costs as well as digital marketing and advertising expenses.

On a GAAP basis, net income and income per diluted share quadrupled as we generated net income of $319,000 or $0.08 per diluted share during Q4 of 2020, compared to $69,000 or $0.02 per diluted share during Q4 of 2019. For the full year of 2020, these same measures more than tripled, with net income of $2.1 million or $0.56 per diluted share compared to $686,000 or $0.18 per diluted share during the prior year.

Changing gears to non-GAAP metrics, EBITDA for the fourth quarter of 2020 increased to $745,000 or 16% of revenue compared to $423,000 or 11% of revenue during the fourth quarter of 2019. EBITDA for the full year of 2020 almost doubled to $4.1 million or 22% of revenue, compared to $2.1 million or 13% of revenue during the full year of 2019.

Non-GAAP net income for the fourth quarter of 2020 increased to $682,000 or $0.32 per diluted share compared to $261,000 or $0.07 per diluted share during the fourth quarter of 2019. For the full year of 2020, non-GAAP net income increased to just over $3 million from $1.7 million and non-GAAP net income per diluted share almost doubled from $0.44 per diluted share to $0.80 per diluted share.

On the balance sheet, our deferred revenue balance, which is revenue we expect to recognize throughout 2021 increased from $1,812,000 as of December 31, 2019, to $2,212,000 as of December 31, 2020, a 22% increase. On the cash flow statement, we generated record cash flows for the year as we generated $4.4 million for the full year compared to $2.9 million during 2019.

Although a successful year, we now put this year behind us and continue to execute on our strategy of being an industry-leading communications company. We will benefit from what we have learned throughout the year and use it to continue our focus on continually enhancing and updating our products, investing in our sales and marketing efforts, refining our operations and back-office functions. There are many exciting things we are working on and look forward to sharing them with you in the upcoming quarters.

I'll now hand it back over to Brian, who will provide some updates on the business, what we have plans for the remainder of the year. Brian?

Thank you, Steve. There's a lot to cover here. We had a nice quarter and year, led by our communications business. Something we should expect to see continue over the foreseeable future. But before we get into 2021 and beyond, let's expand upon some highlights from Steve's remarks. We ended the quarter with a total of 3,226 customers, a new record to end this year, something we believe will continue as we have our eyes set on reaching 5,000 customers by 2023.

If you look a bit deeper into the classification of these customers, this is where the story really begins to show itself as well as the importance of execution in our product platform, sales and marketing and overall growth is communications business.

To end the year, we had 1,498 public companies as customers, essentially flat over the prior year and 1,728 private companies as customers, up 58% from the 1,092 last year. Our public company business has not seen significant growth this year. However, the trends sometimes are not seen in the summaries of just the numbers. As an example, the majority of the Platform id. subscriptions sold in 2020 were a result of public companies taking advantage of our subscription platform at an average spend of $7,500, whereas the majority of the customers lost during these periods, were single product categories like our investor network offering. Conversely, our private company customers have been consistently growing by percentages year-over-year. A good indicator is our newswire brand. It is beginning to find deeper penetration in the North American markets to go from 1,092 customers in Q4 of 2019, and 1,597 customers in Q3 of 2020 to get us to 1,728 in Q4 is outstanding.

We will take a few minutes about -- to talk about what we intend to do to keep this trend moving in the right direction as well as what else we have planned for these private customers. But before we do, let's spend a few minutes talking about our subscription business as a whole. We ended 2019 with 255 platform subscriptions with an ARPU of $7,972. And in 2020, we grew this 34% to 341 with an ARPU of $7,850. So even with our [Presov] 1.5 over the full year, we were able to push past the year's goal of 320 subscriptions, a number that I'm still not satisfied with. We believe we can get 2021 subscriptions up another 35% in a year-over-year comp. And if ARPU holds in line, we will end 2021 with well over $3 million in platform subscriptions. We look forward to the continued platform innovation as well as key strategic product releases that will help assist and push us even further.

This has been an impressive year and outstanding results. We are in a nice growth phase. I recall, earlier last year, we spoke about the investment we were making in our business and our platform and hopes that our gross margins, EBITDA margins would return to historic levels and are better. We are pleased that we could deliver this and now look to what is next and what we are going to do in the business this year that will drive similar or healthier results.

Steve touched on our business lines, changing from platform and technologies and services, to communications or compliance. Not a big surprise as we have been messaging this for a while now. Absent of the allocation Steve discussed, I want to touch on why we're doing this. As most of you know, the growth in our platform business was driven by our newswire brand. Our platform subscriptions and most recently in 2020, our Events business are major components to our overall communications business strategy. When we look at our future, we see these continuing to grow at a rate of which requires focus, investment and strategic direction. This is our company. It is our strategy and where we need to add adjacencies in order to accelerate our business.

This leads me to the innovation, R&D spend and our plans for 2021. Over the past couple of years, we have developed their platform that accomplished some fundamental objectives, consistency and customer loyalty, while keeping an eye on opportunities for scale. This year, we're going to increase our R&D spend by 40% compared to last year for a total of 5% of revenues in 2021. In order to round our product features for our platform, innovate the communications workflow process and strengthen our brand through elegant technologies that customers will love.

This will lead us to several new features, platform enhancements and entirely new products this year. One specifically we recently announced is our collaboration drafting engine for our newswire product. It's an easy to use multi user cloud-based editing enhancement that gives PR, IR and storytellers, the ability to work in the same press release at the same time, moving the creation of the story closer to the editorial process and distribution channels will save our customers' time, and costs associated with creating, editing and approval of these releases. This is a first to market solution that is not available from any of our newswire competitors.

We also plan to launch this year new products geared towards our entire customer base, which should benefit a good percentage of the 1,700 plus private companies that we have today. Specifically, 1 will be focused on where and how a story, a company's message where it lives, gets engaged with and reported from. This new product will be an add-on to our newswire business and be the first of any subscription elements that will round out our communications business in 2021. Another is an extension of our Events business, where we see this new product feature becoming a part of our entire ecosystem. Specifically, investors, journalists and interested parties should have an easier way and maybe automated way to connect with companies and their brands. We believe that we have developed an elegant way for this to happen. From our conference app, press release, webcast and even the company's corporate or Investor Relations website.

Doing these things are vital to our communications business. We are working hard to round out our offerings, provide added value to our customers and in return achieve recurring ARR revenues that are both scale and stickiness.

As a recap, to something else Steve mentioned earlier, our newswire business continues to grow considerably, increasing 29% and 17% for the 3 and 12-month period ended December 31, 2020, compared to the prior year. We also have seen sequential growth in customers and revenues. Something else we should be able to expand substantially once we have all of our new products to market and a renewed ARR model that fits every customer.

In closing, it was nice to see our fourth quarter revenues increased 20%. Gross margins increased by 3% and net income increased 300-plus percent as well as EBITDA increases by 76%. This translated into a record year for revenues, increasing 14%, gross margins of 2% increase and net income by 200% plus as well as EBITDA increases of 92%.

In closing, and as always, I want to thank everyone for listening to today's call. Yes, we had a record year in revenues, earnings and customers as well as appreciation in our share price. But I will tell you, the best years for us are still ahead. Our refined communication strategy is coming to fruition this year, coupled with several new other factors that we assume we'll be able to talk about and which will lead to greater access of our brand.

Operator, can we please begin the Q&A portion of the call.

(Operator Instructions) Our first question is from Michael Grondahl with Northland Securities.

Congratulations on the quarter. Brian, is there anything to call out? Or is it possible to break out a little bit of the Virtual Conference business in 4Q? And kind of speak to a backlog there? How you think that's going to perform in 2021?

Yes. Hey Mike, and thanks for the question, as always. The Virtual Conference business does have some backlog into this year. Obviously, there were deals signed end of year that will be recognized into the coming first half of the year, offhand approximately $0.25 million in contracts and commitments that are signed to be done for the first half. I think that what we've seen is a reluctancy to commit over the entire year. As conference organizers and banks think about what the possibilities are for physical events in the back half of the year. So as we get closer to full vaccine rollouts, we'll begin to see that materialize into both a hybrid event as I think everybody is ready to embrace or a physical event, and we'll begin to see some of that transcend.

As far as the breakout revenues, specifically due to our conference business, we don't currently do that. Obviously, it's impacting both our webcast lines that contributed to significant growth over the periods as well as the conference business. From a number of event perspective, we're likely up about 30% over the prior year in a number of events, just from conferences, we're likely up over 150% on nonconference virtual events such as non deal roadshows, deal roadshows and investor days, which also lead into some of that technology. So as a whole, that business unit is performing well and something that we believe will have growth over '21 over '20 revenues.

Got it. And as you look to 2021, what's 1 or 2 new products or new features that we should really be sort of watching for and better understanding as maybe they can move the dial a little bit on revenue?

Yes. We mentioned a couple on today's call. One, I'll touch on them at a high level for time for everybody. We believe that the editing process of a release is is costly, likely more costly than the cost of distribution. And what that really means is that IR, PR, legal and executives spend a good amount of time drafting the company's [messaging] story and disclosure and have a difficult time trying to manage that workflow. As we've been able to build a product that allows them to do that inside of our ecosystem, they can actually collaborate and communicate and draft the press release all at the same time.

So we believe by doing that, bringing that storytelling and drafting and creation process closer to the editorial will be impactful not for all of our customers, but for customers like agencies and IR firms. And that candidly is areas that we want to focus on more this year than we have in the past year to build leverage and scale into our newswire business. And something else that we've talked about several times on our calls that we're building and likely halfway through the effort to build this is is a newsroom product. And I touched on it today where an article lives and how it's engaged with, as we continue to grow these ACCESSWIRE customers on a stand-alone basis as the numbers suggest, the majority of that growth comes from private companies.

And as we think about how to get a pay-as-you-go or a small subscriber, into a full IR model, we have to find additional products and a newsroom product is 1 that we'll have in Q3, that will enable us to move these customers into a reoccurring rather than a pay-as-you-go model.

The rest of it becomes a natural progression. It is what else are we missing and the buy build scenarios of what we need to establish and execute upon here at Issuer Direct, is what are the additional products that we need to have that our customers identify with and are already spending wallet share on. And we've identified those, and we're going to begin to roll those products out in the back half of this year as well.

Got it. And then maybe lastly, is there any update on the stock buyback from I think about 11 months ago or a year ago?

Yes. There is, actually, we were patient at the market for a good period of time throughout last year with the ceiling price. As a recent board meeting, the Board has removed the ceiling, and there's about $450,000 -- $460,000 left of that initial $1 million repurchase that subject to limitation. Our broker will be in the market, utilizing the remaining part of that buyback. So we're happy about that. We think it's the right thing to do. We think, given the growth of the business and the cash that we're generating, there's no reason why we can't execute against that at current market prices.

Got it. Okay. Great. Congrats and good luck in 2021.

(Operator Instructions) Ladies and gentlemen, we have reached the end of the question-and-answer session, and I would like to turn the call back to management for closing remarks.

Thank you. I appreciate it. Thank you to everybody for joining us today. It looks like from our webcast numbers, and our real-time analytics dashboard, 1 of our new upgraded products that will be released to our customers this week. We had a record number of participants listening. So we appreciate your time. We look forward to follow-up both individually and at any of the investor conferences that we will be participating in, in the next couple of months. Until then, I hope that your day as well. And we look forward to talking to you again. Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.