ACCESS Newswire Inc. (ACCS) Earnings Call Transcript & Summary

Greetings and welcome to the Issuer Direct Corporation Webinar. It is now my pleasure to introduce your host, Brian Balbirnie, Founder and Chief Executive Officer. Thank you, Brian. You may begin.

Thank you. Good afternoon, and a late morning to some of you. I appreciate you taking the time to spend with us to listen and learn about Issuer Direct, if this is your first time being a part of this. If you're a current shareholder and you know the story, then you're going to know a good part of what the presentation is today. Hopefully, I'll be able to get through most of the story in about 20 minutes. We'll come back around and do some Q&A if there is, and let you move on to, which, I think, will be the 1 last company left for today to close out the SNN conference. Probably pairing on your screen shortly there will be your forward-looking statements. Obviously, today's call is based on forward-looking statements. All the information that we'll provide you today will be based on Q2 results and a little look ahead as to where we're headed as a business over the next several years. Who is Issuer Direct? For those of you that don't know us, right, and again, this will be your first time. Business was founded in 2006; scattered throughout North America and a little bit into Europe with 80-plus employees; with inside ownership of over 27%; very unique micro-cap company in that we have about 3.7 million shares issued and outstanding; a clean balance sheet with over $17 million of cash; very poised to get the business to the next stage in its growth. But moreover than not, from a mission statement and reteaching of the market about who we are, is Issuer Direct is a platform communications company that helps thousands of our customers through the process of telling their stories to millions globally. And as we talk a lot about today, you're going to get to hear some of the things that we're doing, get to see some of our customer profiles and logos as well as talk about where we're seeing growth and how our customers are actually consuming our content and what we believe will be as we continue this evolution and story. So what is it that we sell? What do we sell most of? Who are we selling it to? And what does that look like? You'll see 2 boxes on your screen, one is identified as communications; and the other, obviously, is where we started as a compliance company, and I'll talk just for a second on that compliance business. We were, from a historical perspective, the first compliance do-it-yourself software in the cloud. We built the first SEC reporting engine for companies to file directly with the SEC. That included extensions to typesetting, print, fulfillment, annual meeting and insider ownership platforms along with our stock transfer services. We generate a good amount of income today from that business, decent cash flows from that business and good gross margins from that business. But candidly, the business has a cap, right? This total addressable market isn't growing at the rate of which we, as a business, need. So we value that business. And many times, it's sold in tandem with our communications offering. But conversely, in the communications world, our total addressable market significantly increases because now we're outside of the public company space, thinking about private companies globally that need to tell their story in some fashion. And that story is simply about news distribution. Where can I get my message to anywhere in the globe via a traditional newswire or a press release? We run 1 of 4 national newswires called ACCESSWIRE. Most of our shareholders and the brand and the markets and our customers know and love this name. It's where we experienced the biggest part of our growth as of late. And it's where we believe is going to take Issuer Direct into the next stage of its evolution. But what's interesting, with the current pandemic and environment that we're in, our webcasting technologies and business is finding all of these new virtual events. And as you'll see and hear us talk about a lot and have talked about a lot is what do these virtual events look like. Virtual annual meetings, non-deal road shows, specialty events, inside corporate communications. Things that, historically, Issuer Direct has not been focused on, we have found opportunities to build product and move it into our product lineup and our subscription lineup to be a part of our here and now, but also be a part of maybe what's going to be ahead for us in the future. So part of that webcasting is this virtual events business. And then, of course, it is -- it dovetails in nicely to what we're doing here today for the folks at SNN, right? Our technology is powering this event, both from a registration perspective, one-on-one meetings, virtual events, bookings, everything else that happens from start to finish, something that we all likely assumed would have been physical and now is all virtual. So we've been able to pivot this business as well to find opportunities for us to continue to exist and grow. We have done well through the bookings for this product in the back half of the year. We continue to see strong interest in science as we believe there won't be any physical investor conferences till at least kind of late first quarter into second quarter of next year. So we're reinvesting in some of these products to make them faster, make them stronger and really give our customers the ability to have more power and put it in the hands of their presenting issuers and their investors as well from an insight perspective. Who do we work with? So as I said earlier, you'd think of us as the micro-cap company. And for 12, 13 years of our existence, the majority of our focus has been on this -- that space because we resonate well, we play in this community, we have a great deep network, and our bench strength and knowledge is paramount here. But what folks really don't know, and this is what you're seeing now on the screen, is the logos of some of the larger accounts that we've got, that we're continuing to grow more and more of every single day, our technology is used behind the scenes in so many opportunities. Most recently, the new announcement of Ford was powered by our webcast technology and used just a couple of days ago. Analyst days and investor days and inside corporate communications for a lot of these companies in their virtual annual meetings are now using and are being powered by an Issuer Direct platform, whether it's a virtual annual meeting, a conference like we're doing today, or just a traditional webcast that has a heavy video and production element to it. So we're proud of that, right? It's been one of the things that we've said that we'll strive hard to move upstream into markets, and we're now finding those brands are looking at us, both from a virtual component, but also other things that Issuer Direct offers. So we're super excited about that. We wanted to, at least, talk about that a little more because it's something candidly we just don't typically talk about as much. But from a client count perspective, our public company customers on a year-over-year basis for Q2 were fairly consistent, up marginally 3%. But where we saw big growth, 39% year-over-year growth, was in our private company practice. And we talked about, just a few minutes ago, the ability for us to increase the total addressable market and where is it and what is it. And that really comes back to our newswire product and bolt-on things, like IR platforms and newsrooms and media databases that we need to be prepared to service to our customers, we need to be prepared to offer those subscriptions and be able to branch out globally as we continue to commercialize ourselves in North America to have an eye on the future of what that looks like. But for folks that haven't seen it, you can refer back to the script of the earnings call last week and copies of the 8-K and press release are on our corporate Investor Relations website. Revenues were up 18% in Q2 to $4.88 million. Probably the new norm in some degrees for us. The virtual event business is a little cyclical, but we're still finding opportunities that we'll talk about here in a little bit for what the back half of the year looks like and where Issuer Direct is headed. From an additional quarterly highlight perspective, kind of a new presentation and all, just to kind of slim down some of the things that we're talking about and want to be sure that the takeaway points are heard. From a platform and technology perspective, we talked about probably 18 months, 2 years ago of moving this business from what was then high 50%, 60% to get to 70% of our business being platform and technology. We ended the quarter at 68%, so we're on track in that metric that we told folks that we would be at. And we're still finding some stability in our services business as we look to rethink communications and compliance, that's going to change a little bit. But to match our reporting styles of what we have out there today, it was important for us to illustrate that. Growth, for us, in platform and technology came from continued increase in newswire, up 19% year-over-year in the quarter. Our virtual events product continuing to be strong. We're still continuing to see pipeline opportunities be as strong in the back half of this year. Obviously, as we think through full phase-ins for folks getting back to work and having events and being more traditional in the world that we once knew, some of those virtual products will tend to convert back to physical. I think what's important for us to point out is that because we were new in the events business, in general, we didn't have any brands there. And our technology enabled us to execute and grow quickly there. The comforting thing for us is now having brand in this space, whether it be virtual, physical or a hybrid, we feel confident that we're uniquely positioned in some of these banks and brokers as well as some of the large corporations and issuers that we can continue to move our technology platform. And service revenues actually, conversely, were also up 7% for the quarter to a little over $1.5 million, tied a little bit to that events business as we see some service arm components that people need more help with video and teleconference needs that we want to be sure to extend and help them. Not to be under shadowed, our subscription business is still very important to us. We feel like we can continue to grow this. We'll talk about this in a few minutes, but probably at a rate of 20% in the back half of the year, putting us in a good position to continue to grow and move these ARPU numbers back to the areas of which we had about 1 year or 1.5 years ago. I think most folks know where we are today, right? Just a scalable communications business led by our newswire product, ACCESSWIRE, a very sticky reoccurring product set. In the world of a pub co, they have to have an IR website, most of them do earnings quarterly calls, they have to have governance and regulatory filings as well as news distribution and a reach to shareholders. Those are the products that tend to sit very well in a subscription-based flat fee arrangement with our corporate issuers. So we do well there today selling kind of combination packs and subscriptions to those components as well as hundreds more in siloed pieces that we're working hard to continue to cross sell. But as we've seen margins kind of dip in some cases, we're starting to see this rebound occur, right? This scale is really starting to help and pay off. As you folks have already seen, and most of you will if you don't know the story, that EBITDA margins have continued back to increase at the levels of which we wanted, at the high 20s, 28%, it's like $0.21 in net income per share. So it's an interesting concept there, but we need to continue to invest in our products, our people, our digital marketing strategy, to continue to build leverage upon this business that we feel confident that we can do. So where are we headed, right? What's the future look like, right? Obviously, I talk a lot about this. And to a degree, it's almost like a broken record, but customer counts, right, new logos mean the most, for us, as a company, as a management team, as a Board, as a business and all of our employees, are focused on that, right? Find as many new customers as you possibly can in every -- any given period. Love them, keep them, continue to service them, and hopefully, they'll be there for a long time. And the rest of it, although execution strategy is there, tends to take care of itself. But we do want to refine our products. And I think it's really important to do that to address the market demand and the needs that are there for us over the next 3 to 5 years. So you're going to see us begin to hone our messages down to our communication subscription centered around our newswire and ancillary products that we've just talked about a few minutes ago, to help us build scale, right, which can impact those margins and EBITDA. Many folks have said many times, it's not a -- you don't have a cost problem, right? You have a revenue problem. Go grow this business and the rewards will come. And I think that's evident in the results of what we saw for the second quarter. For the second half of the year, right, this is an area that we are, right, obviously in here and the now. And a month in of the next 6 months of this fiscal year and already starting to see the results of momentum continuing to find our ways into double-digit growth in our product communications platforms. The conference business is something, as you all would know, if you're now listening to today's presentations by companies at conferences like this, you're likely on earnings event calls right now. It's probably the second busiest day of the year with over 500 companies providing earnings and hundreds more doing presentations just like this. So we need to stay focused on these opportunities in the virtual space, find our way to have our product platform standardized as a method of transport for our customers' message and how they reach the markets. So if we think about technology, we are actually 1 of only 3 people that have the ability to scale our product in a way that can be done in a multi-tenant fashion of giving our customers, meaning the conference organizers and the issuers, the ability to provide an environment that is exactly what the shareholder or the customer would need, depending on the application. And that takes a webcast into an audio presence with slides, to video embedded, to full video production, to one-on-one meetings, up to 1-by-10 meetings in our conference application, all happening simultaneously. And matter of fact, probably between now here and the end of September, we'll likely have 1,000 to 1,500 companies presenting or using our technology platform in some fashion because of the investor conference world. So we're really focused on that, but also not to think about that being a onetime application, but also for an opportunity to go back to those customers and talk to them about the engagement and find other ways to work with them and continue to build brand in that product. As we said last quarter and we've said prior quarters, we will continue to refine our sales team, our marketing teams and our digital sales approach and the amount of money that we allocate to that. If we found great success in the first 6 months of the year, we want to continue to invest more and refine that strategy and move ahead even stronger. I just said a few minutes ago, right, 20% increase in our subscription business, which would probably get platform ID subscriptions on a stand-alone basis to about 300 or just slightly above 300 for the end of the year. That being said, there are still hundreds of subscriptions on a single base that customers buy every day, whether it's just a newswire subscription or it's a webcast subscription or a conference or an investor relations platform. So there's a lot of other things that we're going to begin talking about here as we round out the year as far as this reoccurring subscription business that we do, in fact, have here at Issuer Direct. And then we want to manage the service business, right? Anticipate kind of a flat, no growth area for us, but continue to manage it as it's tied to a lot of our customers and some of the things that they're doing with us from the communications path. And this capital allocation strategy, I talked a lot about on the call, right? What really is it? What is the company focused on? And it comes down to 3 key ingredients for us really is to fund our organic growth and continue to execute on that strategy; continue to do work in M&A; find these nice little businesses that plug into our ACCESSWIRE product and our communications product that could provide additional scale, make customers stickier; and hopefully, conversely, as you build that value, begin to move the ARRs or even MRRs up with those additional products. And then, of course, be in the market to repurchase, right, to be a part of the buyback and execute with the rest of our shareholders that are supporting the initiatives, the belief that this business is significantly undervalued to what it is today. On a newswire basis alone, we feel the market cap is just representative of ACCESSWIRE. When we think about the rest of it, it's a benefit. It's just an add. And so in combination with the right execution and things that we need to continue to do, we feel like this business is significantly undervalued. Which actually gets me to the end of our presentation. There's one kind of change here that I think it's important to note. It's what's highlighted in blue that says customer and market, right? Our vision is to be the trusted platform that brings both our customer and the market together. It used to be focused around this issuer, but we have to think about what's bigger and out there for Issuer Direct. And to increase the total addressable market for us, we need to sterilize that down to our customer and what we are doing today. I left with plenty of time and there are a couple of questions, it looks like, that have already come in. Hopefully, we'll have time to move through some of these questions. If we don't, I'll be happy to follow up with some of these folks and do this on a more broad basis when time permits.

First question is -- that came in just recently, actually most current is, what is the current ARPU? And how can you break this down by segment? And although that is a wonderful question to ask, I'm not sure that I'd be prepared to give you the full details of that today. In general, ARPU is around mid-6,000 range, 6,400 to 6,500 and growing. I think the majority of that is led by our communications subscription. We're seeing indications that late Q2 and coming into the back half of the year, that these numbers could grow and expand as our clients' demands and needs are also doing the same. They tend to be thinking about licensing more of each of the components and a lot more users than maybe in historical path. So although we don't break down ARPUs by segment, thinking about communications or compliance, we do kind of, in a totality way, think about it as that number. So hopefully, that helps [ Thomas ] there. I'm appreciative of the question. Another question. In getting 3% to 5% of newswire market share, how much is that organic growth versus M&A? And M&A, is there accretive opportunities out there that you can historically be able to find in the compliance side? So there's a lot there. So I'll break this down a little bit if I could, [ Eric ]. 3% to 5% expectation for us is organic. It is 100% our digital sales strategy, growth of our sales team and global branding, that will bring and carry Issuer Direct into that range. No doubt, however, that as we think through the M&A components of what we're doing, there may be some products and businesses that we acquire that will help make ACCESSWIRE a little more relevant for some market verticals that maybe historically wouldn't be on a siloed basis. We are not currently looking at acquiring another newswire. We are not concerned about adding to critical mass in that component by way of distribution or strategically in areas that we don't serve. We're really focused on what ACCESSWIRE has, it's its own news business and what we can add to it there, which I think is very important to point out. So part of that question dovetails into what we talked about in Q2 earnings call is the total addressable market for newswire is estimated by independent research to be about $600 million a year. And based on our news business and our subscription to news business and pay-as-you-go plan, we're about 1% of that market share today. So we've got to aggressively kick up this 19% to 20% to 30% growth engine in news. And we feel confident that we've reached the distribution thresholds. We've reached the applications and technology thresholds that we're building and rolling out the back half of the year that will help us get there. Another part of the question was really, are you looking to find more features and talent? There is a feature of ACCESSWIRE that we don't have today. And I do want to touch on that if I can here. It is something that we all do in Microsoft Word, Excel and any other collaboration engine that's kind of a desktop collaboration system. Typically, the Investor Relations world and the public relations world draft their messaging, their storytelling process in those tools. But let's, for today, just call it Microsoft Word. And they e-mail this document back and forth with good track changes versions between each other, hopefully, with the result of having a phone call or some auxiliary collaboration method. When we think through the curation process and we think through what that could mean for our business, we want to add on to our advanced editing capabilities, which is already ahead of the market in conversion of copy, contents, tables, images in a real time, what they call WYSIWYG editor, very real time, easy to use, with an extension for collaboration, giving our customers the ability to have their PR and internal corp comm individuals or Investor Relations and C-level executive, the ability to collaborate with the document in our platform, in real time, asking them questions, sharing copy and content, making track changes and seeing what each other do. We've proved out this concept. We've worked with it internally and are now beginning to make it part of our next phase development for ACCESSWIRE. Our commitment there is simple. It's flat fixed fee pricing. It's transparent and they'll be the same no matter what, unlike our -- the incumbents. And two, lead by this innovation of technology that typically most news agencies haven't invested in years. And so we want to be known as the innovator there. We've been known as the disruptor, but you can't sustain and grow market share by just being the disruptor of price always. You've got to have something else. And so we've invested in this product in the past. We're going to continue to spend a little money in the back half of the year to invest in it there, which we think is very important. So good questions there, [ Eric ]. I appreciate that. We've got a couple of more here as we round out the last few minutes. How does ISDR differentiate itself from other communication platform businesses? Which is a great one, Martin, thank you for that question. And it really boils down to a couple of things, but maybe for time, I'll touch on one. It's that typically, the PR and IR worlds are buying each one of these products in a silo-based product set. They typically inherit and/or negotiate distribution for news from a newswire. They buy an investor relations website from another provider and a webcast or earnings event platform from another provider. And what -- absent of the news providers, the rest of the communications components of the business are not innovated, built and maintained by the companies that these issuers buy from. It's always product that's built and delivered by others. So part of the earnings event webcast business that is done by some of our competitors in the market today actually use our product. So we're driving a good percentage of the market already. So I think part of this is the siloed purchase to a consolidated purchase is what really becomes a big differentiation there for ISDR, is when we go into the IR and PR world and begin to build relationships. We talk about the efficiencies of a single platform and the benefits that they get for collaboration, compliance, tracking, who's doing what, when and where, who approves and how that fits into a company's cost of framework and auditing procedure is very important. And for companies that care about that, we are a right time, right place solution for them, opposed to dealing with it across a myriad of different vendors. The benefit, of course, is by consolidation, we then have an economic benefit where there's a clear ROI, not only in check, the amount of money that they're paying for it, but secondly, this time value is money concept. If they can only deal with 1 contact, 1 platform and write 1 check, they free up a significant amount of time worrying about change control, audit tracking and logging. And so we think that that's a big differentiation from our communications platform. The second part really is the technology side, right, is that what are we providing our customer the ability to do. I harken to something all the time about earnings because it's the world that we're living in today as a public company. When companies need to distribute earnings, they need to send that earnings press release to the newswire 3 to 6 hours before the date -- the time they want it distributed, in hopes that the newswire teams can convert it to this NewsML format and distribute it to all of the news platforms and aggregators. And those are honorable systems, right? These news agencies are really good at what they do, like our editorial team in ACCESSWIRE. But they do it in a way that takes hours. And we've been able to reduce that round-trip time by putting the technology in the hands of what we've developed to our customer that moves that down to 10 to 15 minutes. And that's a significant benefit to specifically the small-cap companies, right? The $2 billion and smaller sometimes are last minute in everything that they do. Good or bad, that's the environment. And they need to depend on technologies that can provide that. So hopefully, Martin, that answered your question, and I'm happy to follow up with that. Another question that came in from [ Brock ] is, when you're buying back your shares, do you think that -- do you think about the price that you should be paying for it? And I think the answer is simply, [ Brock ], yes, of course, right? But I don't know that that's a detriment to what we buy back, right? I think anybody wants to think about anything they buy and the price of what it is when they decide to purchase it. We've got some upward trajectory here in our repurchase plan. We've got some capital still sitting there that we need to finish deploying, and we're going to continue to do that. But we don't -- and I said this before, we don't want to be in the way of the market and be the one driving, right? We want to be there secondarily and be supportive. And I think that's important for us is that, when we're out there at the times that we can be out there, subject to limitations because there's a certain amount that we can buy back every single day based on historical trading volumes there. I'll round out. I think there's one last question. Question is, could you please break down the webcasting revenues in terms of total revenue? Is the webcasting revenue reoccurring? What's your competitive advantage in the virtual product? And how do you make sure the customer comes back next year? So there's a lot of virtual components there. Webcasting, historically, and I'll use the word, as we've said internally, it's a perfection business. If you continue to perform as to what your clients' expectation is, that contract is going to come back every quarter. And that would be 4 earnings events, right? So last Thursday, we did our earnings call. Obviously, if we weren't the provider of the technology, [ Rob ] and the team did a fantastic job. [ Keith, Chris ] and everybody else in our organization did exactly what Steve, our CFO, and myself, would have expected. We continue that license subscription with Issuer Direct every single quarter. So it is a reoccurring relationship. The second component of this, right, is this virtual annual meeting. This is a combination of our webcast product and our proxy product, which we get licensing for in subscriptions from both. That part of that bump in Q2 that we saw, there's a couple of hundred thousand dollars there and more to follow, came from that product. That's not a reoccurring quarterly thing, of course, that's an annual subscription that is recognized and used in the period of which it's licensed and completed. So we'll see that come back again next year. We are already having conversations with those customers to begin to round out renewals, talk about new feature enhancements and all the things that we've learned to make that product stronger for them. So we'll see that continue to come back in a reoccurring, yearly basis. Competitive advantages from all of our virtual products, obviously, is ease of use, right? Part of this concept is this flat fee pricing concept and the ability to bundle and work your way through the system. Most of you don't get to see the benefit of this today. But I was able to access this webcast and talk to you today from our conference software business. The conference software business with my single sign-on knows who I am. I can manage my entire profile, all the participants of meetings, if I have them at the event, and with a 1 click, could be right here to present to you, and then flip over in which will be not a minute to go to another one-on-one, there will probably be 5 or 6 people there. So when you think about that product, there's nobody else in the market that's providing all of that from end to end, and that's why we feel like these banks and these conference organizers are finally coming to us, saying, "Okay, now a virtual world is here, this is a product for us." I know that there's a few other questions that I didn't get to today. And I appreciate everybody's time. Thank you for your questions, your participation. Enjoy the rest of the event, which is 1 more company to present and a little bit of follow-up from Robert Kraft and the team. Thank you, everybody and enjoy the rest of your day.

This concludes today's webcast. You may disconnect at this time. Thank you for your participation.