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

Good day, and welcome to the Second Annual Winter Wonderland Best Ideas Conference. The next presenting company is Issuer Direct. [Operator Instructions] I'd now like to turn the floor over to today's host, Brian Balbirnie, President and CEO of Issuer Direct. Sir, the floor is yours. And Brian, Your line is live.

Good morning, everybody, and thank you. I appreciate you joining us today to talk about Issuer Direct. I appreciate you spending time visiting the Winter Wonderland in a virtual way. And hopefully, we will be able to see you all in person at a later date. I'm going to talk a little bit about Issuer Direct, who we are, what we do, how we generate income, what our customers look like and then talk to you about the future and where we're headed from a strategic perspective. What you're likely seeing now is the forward-looking statements on the screen. I wouldn't be doing my job if I didn't put your attention towards those to read in our 10-K, and by edification, so everybody knows. We plan to file our 2021 annual fourth quarter numbers on March 3. Look for that announcement coming out forthcoming in regards to when date and time for a earnings call that will happen thereafter. For folks that don't know who we are, and I know that most of you are on the call likely know about us, but I'm going to give you a little bit of high level again for the folks that are new. I want to be cognitive and respectful of those folks. Issuer Direct builds platform technologies, primarily in the communications space that help thousands of customers through the process of building brand, telling their story and reaching millions of potential audience members globally. And some of our products are aligned with that specifically, some are very back-office focused that help drive some of the results of that being in compliance. Business has been around since 2006. I was one of the ones that started the company at the very beginning. Today, we're fast approaching about 100 employees. I think with our current job racks that are out there today we'll be over 100 by the end of this first quarter. Unique for a microcap, small-cap company, 27% inside health with over $21 million in cash. And as I said, you'll see in the 10-K what that will look like here shortly. But also something else unique, right, is the number of shares issued outstanding less than 4 million. We pride ourselves on the equity of which we hold and what our shareholders hold and run the business in a very fiscal responsible way, investing at the right times when we see opportunity coming upon us, and that's what I think 2022 is for Issuer Direct. We break our business down in 2 areas: communications and compliance. We've talked about these for several years. We talk about customer count and public and private, and we're going to start to begin to talk about customers in total. I think that will help focus everyone's attention on where the drivers are of the business, and that is our communications platform. It is driven by our ACCESSWIRE news brand, which is the fourth largest newswire in North America and fast becoming a global news provider. We have built distribution throughout the globe fully now and are capable of servicing our customers both in North America and other places in the globe to tell the story and bring to market their announcements, whether it would be earnings, product releases or a local community event. Events like this, right, I'll call it webcasting and virtual events. We are a strong provider in the space doing hundreds and hundreds of earnings calls every single quarter for our customers as well as likely thousands of other events every quarter. KOL calls, investor presentations, [ dealing on do ] roadshows and specialty events, think back a couple of years with COVID, Johnson & Johnson used our platform to talk about internal communication as it related to COVID in town halls. So we're very well equipped from an enterprise level, even IRS using our product platform in the webcasting world. All the way down to a simple investor presentation like we're doing today that's very mechanical with or without video. Our capabilities are vast. But all of us as investors reach companies that we want to learn more about and/or invested in with alerts in their IR platforms and we service over 500 IR web systems today, feeding content to our customers' platforms. So investors like you and I can gain information, whether it is the passive response, meaning it comes right to you without you doing anything, be our alert network or visiting the platform and getting the information you need such as presentations, transcripts and the like. We power that as well. Late last year, we developed and built and took to market in virtually under 90 days, a newsroom product. It's an extension of our IR system, but it is more so an extension of our first product commitment to the largest growing customer base we have, which is this private company setting. There's thousands of private customers that use our platform every single quarter to tell their story, and that is a great thing. And that number is going to continue to grow. You'll see Q4 numbers were strong and customer growth as well when we report. But we felt like we needed more products and a commitment to provide additional subscription-based tools to those private customers rather than just newswire. So our newsroom absolutely is that; it is coupled with a brand asset manager and a contact manager. And I know for context, I could talk about those 2 things independently. So maybe in one-on-ones and others, I'm happy to unpack that a little more. And then the virtual event business, I already touched on a little bit with webcasting. It's very important to think about annual meetings and conferences, special events and NDRs, there's really nothing that we can't do there from an out-of-the-box solution, all the way to a custom development solution. We've got to answer in that virtual events business. And as you know, that has been a predominant focus of the market the last 2-plus years, maybe 2 years in a couple of months. But I will tell you that, that is starting to decline. Folks just want to get back to in-person meetings and/or hybrids as they tend to call them. And so we're excited about the hybrid event for a lot of reasons. One is, we feel like it's time to get back out there and shake hands or rub elbows, whatever you want to think about, but also more importantly, the hybrid solution provides us as the provider an ability to have an economic that may be a little different to us. And the preliminary look at this is the hybrid event may actually end up being a little more expensive for our presenting conference organizers. The companies won't be any different. But so for us, it could be a little better. So we continue to look and try to figure out the best ways to handle those virtual events to ensure that we're there as partners of our conference organizers and banks. And not to be forgotten about the compliance business. It's a strong part of our business. I think I've messaged for the last year that, that business should see single-digit decline. And I don't mean to be tongue in cheek, but I'm going to tell you to expect that next year because it seems like every time, I do say that, that business grows. It's continued to grow throughout 2021, and we're starting to see that, that's a trend that's going to happen here in 2022 as well. Most of the growth in that business has come from our focus on consolidating sales, leadership around the compliance solution, meaning an annual meeting, a virtual component and stock transfer services. Secondarily, compliance-related filings. We've done a really good job of cross selling those customers, putting them into contracts that encompass everything in the compliance space, whereas before, it was a very much appointed solution, sell one and continue on. So that part of the sales organization has done a wonderful job there. We continue to believe that's a strong part of our business. But as most of you know, as this communications business continues to expand, we bring new products into that fray. We're going to see that being a lesser percentage of the total overall business itself. If I move along just a little bit here and start to talk about customer count. These are obviously Q3 numbers, if you obviously respect the disclosure process for that, about 1,600 and almost 1,700 public companies and about 1,800 private customers with revenue is about $5.4 million, almost $5.5 million, which is 12% year-over-year. And I think I've messaged clearly to folks over the past 2 years, we're a team's growth and hire business. 12%, one may think that that's good. And I would tell you that from a management perspective, we're not satisfied with that. We know that we can push the business further on a consolidated basis. Our newswire business itself grows at 30%, 35%-plus on a year-over-year basis and has sequential growth in the team. And we're not saying that we want to get the entire business there, but we believe our communications business can absolutely be into the high-20s growth in the next couple of years, and that includes this year, 2022. But absolute the logos that you see on the screen, I don't need to talk about them, you could visually see those. Just keep in mind that when you see 10-K numbers, we're going to consolidate our customer account numbers. And from a segmentation basis, we don't think it provides any value for a reader to see customers separate in public and are private. So we'll focus heavily on the total number of customers then we're going to focus on the number of customers that subscribe to our products, and we'll give you ARPU for those numbers. I think that is very important. As we continue to mature that disclosure or KPI, if you will, we'll really get into LTVs and churn rates here this year as well, which I think is ultimately very important from an investment perspective, how to gauge our fast-growing business and where we're headed. So we're excited about getting to that point. As we move along, what we're going to sell tomorrow and I would tell you moreover than not, this presentation is very mechanical. This will be the last time I used this format because we're going to spend a lot of time talking about some of these highlighted areas here in coming presentations and likely with our 10-K that we'll have our earnings call on. But I've highlighted 2 areas. Media database and media analytics, call it, monitoring, if you think about it that way. Those are complementary products to our newswire business. They're complementary products to [ newsroom ] business. And I'm not suggesting anything other than the obvious. When a customer has a budget for our communications part of their business, they tend to look at all of these quadrants. They look at news distribution. How do I get news to my website? They look at how do I reach media? How do I monitor what I'm doing? Do I get a clear ROI? Do I have any sort of measurement of what's happening? And we've done a wonderful job of growing a news business absent of having these products. But when you talk to our customers and you ask them what else they're doing, they all have budget and wallet share that's dedicated towards database and monitoring and analytics. So we started to build components of these. We are very acquisitive in the market looking for M&A opportunities that could fit some of these as well. And we're confident that we're sooner than later going to have an offering in our product platform that addresses these components. There is one item that I don't mention here, and it is a very audacious goal to have. And so absent of me just saying it verbally, we likely won't address it in our presentation perspectives, at least not right now. And that is social. Everybody thinks and is on Twitter or is on LinkedIn or is on some other Facebook mechanism. A good portion of the private companies in the world or even small businesses are looking to reach customers in a social way. Today, ACCESSWIRE has a social API connection to all the major social platforms. So what that means is you can connect your social accounts to ACCESSWIRE and the minute the press release goes out, you can distribute it. It's a push product API. Fully licensed and integrated and been there for over a year for our customers. What the other component of social that we don't have is the pullback. How many people liked, shared, retweeted and what is the influencer power of the person that did it. And that is something that customers are looking for, and they want to tell these local stories and global stories, it's important for us to get to that point at some time. But right now, we're very focused, tactically, on database and analytics as a component. And so that's why I called that out in the slide. I think it's very important to do that. If we break down quarterly numbers, I think one thing that you're going to see because of this compliance business growing, it's been a little different to think about total percentage of revenue coming from communications. We've been in that 60% to 65% number for quite some time. And folks tend to want to think of that number being 70% or 75%. And I fully agree with you, had our compliance business decreased at the rate of which we spoke about and based on what we planned, you would likely have seen our communications business grow to 70%, 72% of top line revenue. So what you're going to find for the end of 2021, is that they have an adverse effect because compliance business is growing so much. And so we wanted to be able to ensure that everybody understands, even though this communications business is growing by dollar value because compliance is also growing, it is also keeping this number about 60%, 65%. However, with that said, I think the accelerated new product offerings are going to help outpace it. And so I would expect to guide that in 2022, we're going to see the communications business get to 72% to 75% of top line revenues is what we'd expect to see in some of that. Another metric that we talked a lot about throughout last year is the number of Platform id. subscription. And I think if folks know the story and talk to us quite often, you know that we've always disclosed customers that buy certain products, meaning Platform id., they license the entire platform. That entire platform essentially is their news, their earnings calls, their IR website and the like maybe added in some compliance. And that number, we guided to be 500. We were trying to get to December 500 by the end of the year. When we release our numbers in March 3, you're going to find that we're right there with what we said we would be at. But conversely, as we talk about subscribing customers, there's also another, call it, 450-plus that are buying other products, maybe it's just 1 or 2 solutions for us that are also subscription. So as we went through this, we've thought to ourselves, it's very important to articulate to our investment community exactly the number of customers subscribing to our product platform and just disclosing Platform id. wasn't essentially doing that for us. And so as we go through this change in disclosure, I think it's going to be very important to see some of those metrics. But it's also important to know that what we guided, we actually delivered. And I think that's an important process for everyone to understand as well. As I move through the back half of these slides, I'm going to end up losing my voice here, so I apologize a little bit. Burton Taylor is a research firm that does quadrant analysis in the communication space. We rely heavily upon Burton Taylor to get some data from them every single year to be able to analyze the markets as best as we possibly can. And what we discovered is the CAGR in the industry is about 6% to 7%. And then the last measurement period is about 5%, believe it or not. It's trending to 6% and 7% now. And we look back at our revenue over a 5, 6-year period and look at what our CAGR was that outpacing the market of what it is. And I know to an example, some of this should be obvious because a small disruptive upstart, typically, they can grow at a faster rate than some of the larger [ companies ]. The second part of that is I think it's very important to realize and I apologize, but I think, is to look at what we're generating from an EBITDA perspective. If you think about our peers, and I'm going to give you peers that are rightsized to us. I'm not going to look at the larger ones all the way, I will include just one of them. Vision is a big competitor to us. Unfortunately, it's not private, but very difficult to benchmark. Meltwater is a newly public company within this communication space. Q4 is a new public company that's in the compliance and communications spaces. And then groups like Innodata and Schrack, all good groups. They come at the market in a very different way. When we examine each one of these companies, they're on a similar growth track to us, from some of them less, but they're not really fundamental in an operation of the business. None of them have positive EBITDA. These companies don't make money. They have shared number of totals that are in the 50 million to 100 million to 200 million shares issued outstanding. And I think that it's just fundamental to who we are and what we're doing. And so from a CAGR base, our fundamental belief strategically as a management team is to outgrow the market at 2-plus fold on a CAGR basis and continuing to maintain that EBITDA numbers in the teens or into the 20s. Everybody knows me that's on this call that talked to me before, I'm a 23% to 25% EBITDA-driven person and very focused on those numbers. And so you understand that both from Tim, our new CFO; and our former CFO, Steve, which is still with us today as the Controller. Us, Jennifer, our EVP of Sales and Marketing and the rest of the management team are very focused, both top line and bottom line, managing the business accordingly. I talked about this slide a little bit in the prior slide really, what we do today, everybody knows, what the future holds. I think it's very important to understand that we're going to try to slim down our product offerings. We're moving platforms together, building innovative improvements to each one of the systems. I'll give you an example for the last 2 years, our virtual annual meeting product was the solution sold by our sales team and then delivered by our service delivery team, both our webcast teams and our onboarding group. We've built some automation to that technology. Our customers now can go in and configure, set up and run their own virtual annual meeting without needing us to be involved. And so we're looking to capture a bigger market share in that product offering this year. We've begun the marketing campaigns for that now and expect to see good growth in that product segment for us in 2022 and going forward. And I think regardless of whether folks go back in person for a virtual meeting or not, I think people have become accustomed to the fact that they can gain access to an annual meeting of a company I'm invested in, in a virtual way that it opens up participation. It is to the right corporate governance thing to do. So companies are beginning to adopt that as part of cost for their virtual -- for their annual meeting perspective going forward in the future. Customer accounts, right? We want to more than double our customer accounts by the end of next year, 2023. So I'm not going to give you forward-looking data to know what we ended 2021 at, but you'll see that shortly and just kind of guide from there. And then we said about this newswire, our market share are growing to get to 3% to 5%, and I know that's a pretty substantial difference. Although, it doesn't seem as such, but when you think about the newswire market at $600-plus million, get to 3% to 5%, what's the difference with the chasm there between the two? And what the difference is, is having additional products. If you have media database and analytics and monitoring as well as the newsroom, it helps drive growth in newswire services much quicker. So I give the range because I think in reality, if we just had to sit with what we've got, we'll get to a 3% market share of customers telling stories in the market. If we have these additional products, the sooner we do, we'd likely get to the 5% number. And so I just provide the range just so folks understand where our beliefs are and what we're doing in that respect. End of year. We talked about double-digit growth, both in our communications business and I haven't said compliance, but you'll likely expect you'll see some double-digit growth in our compliance business as well. We are very focused into this year, new opportunities like our newsroom product and bringing to market the other products that we've also spoken about and then continue to invest in our sales and marketing teams. We've likely probably increased that team over the last 6 to 8 months by as much as 40%. And we're continually investing in our sales and marketing budget ahead of perhaps what some people may think because we're very confident in what we're going to be able to achieve this year and the years to come. And there are territories in the market globally that we're just not servicing. So we're going to continue to invest there. And as we see the returns come as we'd expect, we'll continually invest more and more there. We talked about the subscription numbers being around 500, we'll disclose that when the time comes and then continue to manage this compliance business. So as the little antidote from earlier, I'd suggest that it will be a single-digit declining business, and we'll likely see it come out to be much better than that. And I think one thing that's not on here that I want to bring up and discuss and if you visit our corporate website, ACCESSWIRE and Issuer Direct, both, you'll see the AICPA logos at the bottom certifying or at least attesting to the fact that Issuer Direct now has a top 2 type 2 controls process that's been audited and independently verified. And that is an important step for us. As we think about large enterprise customers, we talked about moving upmarket. We've been very fortunate over the past couple of months to have some big-name customers using. We've got multibillion-dollar market cap customers using our newswires every quarter. One of the top names that you'll know in the U.S. or even globally is Moderna. Another one in Canada that you may know is CCL, which is a few billion-dollar market cap itself and -- so we're moving in the right step. However, in order to really move through that process is to get to a point at which we can gain scale in the enterprise and large cap marketplaces to have all the proper Is and Ts dotted and crossed, meaning security, backup procedures to ensure that even though we have been doing them, right, is to have them independently verified that we're doing them and doing it correctly in that framework of what SOC 2 looks like. And so there's 5 components of the SOC 2. Typically, folks in our industry do the 1 or 2 of them. Availability is the most important and confidentiality is the second for us. And those are the 2 that we've obtained independent review of. We will continue to do this every year. It's an important step for Issuer Direct as we continue to grow our business and move into that next layer of customer size. I take a couple of minutes for some questions. Maybe there is some here, and we'll take a quick look. And if there's none, I'll be happy to check with everybody on the one-on-ones, we reschedule some more meetings if it suits everybody.

But there is one question that just popped in. There's a little bit more. First one is double the customer count from when to when? What is the path to double the customer count? How will you achieve that? It'd be great to know; one, the cost of acquisition; and two, the LTV of the customer? That's a great question. Double customer counts we look at when we think about ending 2021 to what it will look like in 2023. And I'm not suggesting I'm guiding a number that is actual results, right? But it's for comparative purposes only, let's assume that today, we ended 2021 with 5,000 customers. We believe at the end of 2023, we'll have 10,000 or greater customers using our product platform. Now what I would also suggest to you in thinking about that client growth is that the economic likely could change significantly as we dispersed throughout the globe. The cost of press releases in the United States and Canada are generally built upon a subscription or an individual economic that has a preserved pricing model, that we generate 75% to 80% gross margin. When you go out through the globe, they tend to be much different. The process is much different. The distribution is much different. And the economic is unfortunately much different. However, in order to capture market share, we have to be able to do that. And so likely the margin contribution of foreign distribution or global distribution is going to be less. So if it not wouldn't be as simple as just applying the economic value and the revenue to 5,000 customers and then doubling it. It may not be so linear in that respect, but just something to keep in mind as we think about customer count numbers. The next part of the question is cost to acquire the customer and the LTV of the customer? And so there's 2 components to a cost of acquisition, right? There's the component of an e-commerce way, meaning, if we generate good SEO and good PPC strategy, a lot of our customers are one click and buy a press release to begin, which means, if you're looking for the best news distribution in North America, let's assume that's the key word. You hit on our ad, all of a sudden, you're presented with an opportunity to learn more about ACCESSWIRE, schedule a demo or buy a press release right there if you're ready to tell your story. Those conversions happen daily. Every single day, we get customers coming into our platform doing that. And that is part of our bifurcated sales team. So the cost to acquire that customer is minimal, sub-$200. And that would include costs for marketing expense, which is SEO and PPC and the marketing burden for that. And then the sales rep contribution of bonus against the KPI to generate that customer. The economic is likely $350 to $1,000 on the first sale. That account executive is charged with closing the deal, helping the customer onboard and moving them off to a client services team. Client services team is, of course, then charged with expanding the accounts, continually selling the more press releases, newsrooms and other products depending on whether they're public or private. So that's when you start to see the customer values grow. But conversely, then back to the second part of it is LTV. On the LTV side, we typically keep a public company for about 3.75 years. On the private side, it is much different. It is likely about a year. And the reason why is because the vast majority of the customers come in and tell a story today, and they may not have anything to tell in 6 months. And if that happened over an annual report period, we've got to measure the number of customers that did work with us during the period. So those numbers do fluctuate a little bit. It doesn't necessarily mean they're gone. They just have no ability to do anything during a period that were measured. Hopefully, that answers your question. I've got a few more. I'm running out of time here, but I'll do 2 more real quick. Is the ICR looking at some M&A with the cash? If so, how is the recent volatility in public markets affected valuation? That's a great question. Short answer, yes, right? I think with a cash position like us, raising capital back a couple of years ago, like we did and having an equity structure like we do and a business that we firmly believe can grow, part of our capital allocation strategy is to deploy this cash. And as most of you know, we have paid dividends in the past. Not something that we're focused on doing, again, we want to deploy the capital to grow the business. On the flip side, the market volatility, I would tell you likely at the deals we're looking at does not necessarily change a lot what is going on in that regard. And so we're still seeing fair values in the market. We're not going to chase deals up. We've declined deals that are too heavy on multiple valuations. And so I don't think that the market coming back down a little bit is causing us to see any better deals, just seeing quality deals is more important to us than anything. And the last one, can you achieve double customer counts with only organic growth? Or do you need to make an acquisition? I think it's product development and/or acquisition. It helps us get there. News distribution alone is going to continue to grow. If we grew it at 30% in the front half of last year and we grew to high-30s or 40% approximately in the back half of last year, we have no reason to believe we're not going to be able to continue to do that. But in order to build fuel in this engine and go faster, you're going to need product innovation, meaning new product added, new product comes added by 2 ways, right? It's acquire or build. We built one. We want to build more, and we want to acquire more. So we're heavily focused on those. And the biggest part of our business right now, from a corporate objective standpoint is how to deploy the capital at the right time with the right product or the right building of products in order to benefit our customers as quickly as possible, which will benefit us the shareholders in the end. I appreciate everybody's time. We are out. There's a few more questions, unfortunately, I didn't get through, and that's my bad. I look forward to doing some one-on-ones. It looks like I had a full schedule book in the last couple of days. Thank you so much, and enjoy the rest of the event.

Thank you. Ladies and gentlemen, that does conclude the Issuer Direct presentation. The next session will begin shortly. Please consult the conference agenda for the next presenting company. Remember, one-on-one meeting requests are still open, so be sure to log into the conference platform and request more meetings. You may now disconnect.