ACCESS Newswire Inc (ACCS) 2021 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Issuer Direct Corporation 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 call -- turn the call over to Mr. Brian Balbirnie, I'd like to read to 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 positions, markets and economic conditions, product releases, partnerships and any other statements that may be construed as predicted prediction of future performances 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 today 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 '21. For your convenience, a copy of the press release is now available in 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've picked right up from our prior success of 20% 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 accounts 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're 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's still strong opportunities for growth in this customer segment.

Before Steve gets into the results for the quarter, I wanted to provide an update on the company's repurchase plan. During the first quarter, by Board action, the ceiling 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, manager believes that as long as we continue to generate the cash flows as we have historically from our operations, we should maybe consider the future buyback of the plan. Steve, take it away.

Thank you, Brian, and good afternoon, everyone. As Brian mentioned, we got off to a great start with the first quarter of 2021, taking it right where we left off from 2020. Both 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 in our sales and marketing team are paying off, and we intend to continue this while also increasing our spend in our products and technology.

I will now highlight some of the results we achieved during the first quarter. Total revenue for the first quarter of 2021 was $4,980,000, 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, a 64% of our total revenue. For the first quarter of 2020, Communications revenue accounted for 60% of our total revenue.

The increase in revenue was driven by our ACCESSWIRE branded Newswire, which not only drove stand-alone press release revenue but also new subscriptions of Platform id. ACCESSWIRE revenue increased 38% over the first quarter of 2020 due to an increase in the volume, customer count and revenue per release as we continue to benefit from our e-commerce platform and spend on digital marketing.

We also continue to generate increased revenue from licenses of Platform id. During 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 and 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 costs associated with our legacy ARS business.

Moving down to operating income. We posted operating income of $707,000 for the first quarter of 2021 compared to $248,000 during the first quarter of 2020. The increase is primarily attributable to the aforementioned increase in gross margin, partially offset by an increase in operating expenses due to continued investment in our sales and marketing, product development and corporate teams. Sales and marketing costs increased 20% due to increased headcount, commissions and digital marketing costs. Product development costs increased 28% from the first quarter of 2020 due to an increase in headcount and development consultants. General and administrative costs increased 15% due to higher personnel expenses and professional fees, offset by a decrease in bad debt expense. Partially offsetting these increases was a decrease in depreciation and amortization due to intangible assets, which became fully amortized in 2020.

On a GAAP basis, net income and income per diluted share more than doubled. So we generated net income of $545,000 or $0.14 per diluted share during the first quarter of 2021 compared to $226,000 or $0.06 per diluted share during the first quarter of 2020.

Looking at some non-GAAP metrics. EBITDA of $992,000 at the first quarter of 2021 increased $370,000 or 59% compared to the first quarter of 2020. As a percentage of revenue, EBITDA increased to 20% for the first quarter of 2021 compared to 15% of revenue during the same period of the prior year. Non-GAAP net income for the first quarter of 2021 increased to $687,000 or $0.18 per diluted share compared to $397,000 or $0.10 per diluted share during the first quarter of 2020.

On the balance sheet, our deferred revenue balance, which is revenue we expect to recognize over the next 12 months, increased to $2,383,000 as of March 31, 2021, compared to $2,212,000 as of December 31, 2020, an 8% increase.

On the cash flow statement, our cash flows from operations more than doubled as we generated $1,269,000 during the first quarter of 2021 compared to $602,000 during the first quarter of 2020.

We now set our sights on continuing this path of year-over-year revenue, EBITDA and cash flow growth throughout the rest of 2021 and beyond. Our ACCESSWIRE revenue has generated solid growth over the last couple of quarters, something we will continue to focus on with the sales team and digital marketing activity.

I'll now hand it back over to Brian, who will provide some updates on the business, new products in the pipeline and everything else we have planned for the remainder of the year. Brian?

Thank you, Steve. What a great quarter. As you highlighted, Q1 results is another record quarter in revenues, earnings and customer counts. Momentum is a powerful thing, and it's extremely important right now as we're continuing to accelerate our business transformation of being a communications platform technology company. The entire team is excited on our growth, which we're seeing in the financial results and also in our pipeline, product development and business process improvements. I am proud of what we're achieving. But as most of you 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 6,000 to just over $7,600 a year from over the past year. Closing in at our target of reaching $8,000 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 saw our AGM business and stock transfer businesses achieved better-than-anticipated results. We are optimistic that Q2 performed similarly, which will be driven by our AGM businesses overall, particularly the need for virtual meetings 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 a slightly reduced subscription model.

Conversely, in the back half of the year, many of our compliance customers will be relying upon our teams to support their SEC-mandated in line 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.

Our Communications business has benefited from some significant outcomes over the last several quarters, not only with product innovations such as our real-time collaboration engine that was made available to storytellers in our newsroom product earlier this year, but also our analytics engine update in our Events business, which monitors engagement and participation, and it has become a customer favorite over the past couple of months. But also customers' revenues and overall growth, all of our products in our communications lineup have grown for the quarter, both in revenues and in customers.

In order to continue this, we are committed to invest in new products, specifically building natural add-ons to our communications platform, some of which are more common in the market than others. Newsroom, something we spoke about last quarter is about 1/3 of the way through our development phase, and we anticipate launching this new product in Q3 of this year.

Also on deck will be a new product called Brand Asset Manager. This product will allow customers to deliver corporate assets to their newsroom, press releases and audiences, all while we deliver analytics at insight into who is engaged, requested and viewed these assets in an ever-changing, fast-paced digital environment, Our Brand Asset Manager product will make it easier for our customers and their teams to find, manage and distribute assets to any channel.

We also have our sites set and other strategic products that will round out our ecosystem, things that we've talked about for the past several quarters. And in the coming months, we'll be able to share these innovations and strategic developments with you. As we have said, doing these things are vital to our Communications business and provides the added value to our customers. And in return, achieving reoccurring revenues that are both scale and stickiness.

Our newswire business continues to grow, increasing 38% for the 3 months ended March 31, 2021, compared to last year. We have also seen double-digit sequential growth in revenues and customers, and we continue to believe that these customer accounts and revenues will continue throughout the remaining part of the year. Once we have all of our new products to market, and a renewed ARR model that fits every customer. We believe the scale in this business can increase even more next year as we continue to invest in our future. At the same time, our brand continues to be more prevalent in the market.

Lastly, we have spent a considerable amount of time this year on our diversity and ESG plants, topics held in high regard with our employees, customers and our shareholder base. An example of this was announced on April 14, when we talked about joining the 21% of global platform that helps companies to have a positive social impact through their businesses. For us, it was about how we could help our industry and our community prospect. Typically, companies that join the pledge have the option to donate 1% of their revenues, profits, time or product or in any combination. We chose the investor education and advocacy as our movement, where we think we can have impact. We will be donating 1% over time and 1% of our product to accomplish this in an annual event called Access to Give It, a conference that will be held in July of this year. We have a handful of causes that the program will initially be a part of to help through this investor education and advocacy. The proceeds that we will benefit from these groups will go directly to them. We are hopeful to have 150 companies and over 1,000 investors participate, along with keynote speakers, all done in a virtual way with our conference software and events platform.

In closing, it was nice to see the first quarter revenues increased 24%. Gross margins increased by 3% to 72% and net income increased 141%. EBITDA also increased 59%, translating into another record quarter for us. It is always a pleasure of spending time with you, talking about our results and where we're headed. Thank you all for listening.

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

(Operator Instructions)

Our first question comes from the line of Mike Grondahl with Northland Securities.

And congratulations on the continued progress. Brian, could you talk a little bit about what's driving that 38% growth at 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.

Thanks, Mike. Nice to hear from you. Yes, the ACCESSWIRE growth is broken into 2 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 2 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 an 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 our 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 is we have a bigger seat at the table with some of these mid-cap and larger as well as just North American larger SMEs that we'll be working with.

And in the 50 subscriptions you sold, which was a pretty big number for 1 quarter, a record if I'm right. But is there anything that sticks out there in terms of product that's picking up steam or selling better? What would you attribute the 50 to?

It's heavily led to our communications focus strategically, as we've reestablished our revenue streams as being Compliance, Communications, give or take 1 or 2. I think it was 45 subscriptions during the period were Communications focused. 5 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've -- we have had quarters in the past where we have 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 it can do nothing but get better for us. But we should always anticipate that the majority of this will come from our Communications business.

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?

Yes. Basic newsroom will likely be about 2,400 annually a year for a company. When they add Brand Asset Manager, it'll quickly climb to high 3s, almost 4,000 a year. So we're confident that we're going to see our low-end subscription customers in the private company side that perhaps is averaging, say, 4,000 annual year that will quickly get their average spends back up to what is the norm for our public company business to try to normalize the 2 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 in the newsroom itself. And that will start likely just about $1,000 price point for the year to have that asset leverage for them. So those 2 products that we talked about them prior to today's call and in today's call, we still have 3 to 4 other new products that we've talked about via 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 life cycle, what products are necessary to see scale to reach this multibillion-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 2 this year.

Our next question comes from the line of Brock Erwin with CleverInvesting.

And congrats on a great quarter. It looks like the business is definitely firing on all cylinders. I just have a couple of 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?

It's a good question, Brock, and thanks for joining today and asking, yes, we have, I think, as you all know, in prior quarters, meaning the last year and the year before, heavily focused in our sales and marketing teams for growth, been focused on 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 were close to approaching this 100-employee mark, is we're hiring key individuals in all departments now in 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 higher 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 and news distribution. We've added head count and 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 during the 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 times. So it's been a great experience, and we have a wonderful HR team and 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 could do that for us.

Fantastic. 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?

Yes. I'll answer them independently because I think there are 2 distinct products that deserve the localization of it. Let's start with the newsroom product. And we are in the IR space come to expect this where 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 and your Investor Relations platform. And typically, 90% of the 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 a 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 to write 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% on 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 they 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 head shots and logos and brand standards guys. 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 the 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 a recruit for that here a few months ago was to bring that institutional knowledge to us. What did the top 10 newswire product or 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 at them. And one thing we clearly found is the majority of them don't have an asset library, right? And there's brand asset managers. We refer to it as that 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 pricing 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 or equal to them in distribution and more about innovation than what we're providing.

So those are 2. We've got several more on the kind of in the plans for us, but definitely having a product manager and building corporate strategy around that has been very important to us this year.

Awesome. Great. Well, that sounds -- I'm excited to see you launch those new products in the rest of the year.

(Operator Instructions) There appear to be no further questions at this time. I'd like to turn the floor back over to management for closing comments.

Devin, thank you very much. Fantastic job as always. We have pretty your hard work during this time of the 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 you folks in follow-ups and at the next virtual conference. Have a good day. Thank you.

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