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

Hello, and welcome to ACCESS Newswire's Third Quarter 2026 Earnings Conference Call. My name is Lamar Waller, and I'm the editorial Manager here at ACCESS Newswire. For the past several years, I've had the privilege of leading a talented dedicated team of editors who work around the clock to help thousands of customers get their stories to the audiences that matter most. I've seen some remarkable stories come across my desk, though I'll keep those to myself today. What I'd rather share is how much our platform has improved. These improvements are helping our customers deliver their news with higher quality and stronger engagement than ever. I encourage all of you to see spot in action. Before we begin today's call, I would like to remind everyone 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 predictions of future performance or events are forward-looking statements. These statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied by such statements. We will also discuss certain non-GAAP financial measures, which are provided for informational purposes and should be considered in addition to, not as a substitute for GAAP results. With that, I'll turn the call over to our Founder and Chief Executive Officer, Brian Balbirnie; and our Chief Financial Officer, Steve Knerr. Brian?

Thank you, Lamar. You and the team do an amazing job helping our customers every day. I'm sincerely appreciative of your leadership style, your calm approach and best of all, the surprise backgrounds on our weekly Teams calls. I also love the plug of our new spot product offering you did in your opening remarks. With that, good morning, everyone, and thank you for joining us to discuss our third quarter 2026 results. Our third quarter demonstrated the resilience of our business model in a rapidly evolving newswire market. Our unit economics performed despite the decline in revenues, and I want to start with a few of those highlights. Gross margins came in at 75%, an increase of 2% over the second quarter and consistent with last year. Adjusted EBITDA was $829,000 or 15% of revenue and cash flows from operations were $469,000. Subscriptions keep moving in the right direction. Subscription revenues reached 60% of our total revenue, and our subscribers and average ARR per subscribing customer also grew to 1,213 customers and/or $12,331, respectively. The average price of a press release also increased, supported by our social monitoring and insight and analytics products previously released. And our total customers grew 14% year-over-year to $14,134. Our cash position remains consistent with prior periods. We completed our $1 million share repurchase plan, and we plan to continue buying back even more shares in the remaining part of this year. Honestly, all of these results are overshadowed by the industry slowdown, which has impacted our press release growth. Revenues came in at $5.5 million compared to $5.6 million in the second quarter and $5.7 million a year ago, which is attributable to the broader slowdown in press release volumes. Steve will review the financial results next. Then I'd like to come back and discuss what we're seeing going into 2027, our restructuring that we just completed in October, our new products and positioning for AXIS Newswire's next phase of growth. Steve?

Thank you, Brian, and good morning, everyone. I'll now take you through the third quarter and first 9 months of 2026 financial results. Total revenue for the second quarter of 2026 was $5.5 million, a decrease of approximately $103,000 or 2% compared to Q2 2026 and $208,000 or 4% compared to Q3 of 2025. The decreases were primarily driven by a 12% and 15% decrease in volume, respectively, from our core press [ lease ] business, reflecting softer in distributions. However, revenue from our Pro Plan customers as well as revenue from our new social monitoring and Insight and Analytics products partially offset these declines. Revenue from our IR products was flat compared to the prior quarter and increased slightly compared to the prior year. For the first 9 months of 2026, total revenue was $16.5 million, down $360,000 or 2% from $16.8 million in the first 9 months of 2025. The year-over-year decline was due to 3 reasons: first, a decrease in core press lease revenue of 1% and primarily due to lower average revenue per release in the first half of the year and lower volumes during the third quarter of 2026. Second, a decrease in revenue from our webcasting products due to lower revenue from resellers in virtual annual meetings; and third, a decrease in pro offerings due to customer attrition. Gross margin for Q3 2026 was $4.2 million or 75% of revenue compared to $4.1 million or 73% of revenue in Q2 2026 and $4.3 million or 75% of revenue in Q3 of 2025. The increase in gross margin percentage compared to the prior quarter due to distribution costs falling more in line with prior year due to the lower volume I spoke about earlier. For the first 9 months of 2026, gross margin was $12.2 million or 74% of revenue come to $12.8 million or 76% of revenue during the same period of 2025. The year-over-year decline in gross margin percentage primarily reflects higher press release distribution costs from a combination of new partners, increases from existing partners and additional usage under variable contracts. Moving to operating expenses. Total operating expenses were $4.3 million in Q3 of 2026, down $153,000 or 3% from $4.5 million in Q3 of 2025. For the first 9 months of 2026, total operating expenses were $13.4 million, down $549,000 or 4% from $13.9 million in the first 9 months of 2025. We continue to balance cost discipline with targeted investment in areas we believe we can support future growth. General and administrative expenses were $1.4 million for Q3 of 2026, a decrease of 5% compared to the same quarter of last year and $4.5 million for the first 9 months of 2026, a decrease of 13% over the prior year. The decreases reflect lower bad debt expense, stock-based compensation and nonrecurring expenses. Sales and marketing expense was $1.7 million in Q3 of $26 million, up 5% compared to Q3 of 2025. For the first 9 months, sales and marketing expense was $5.3 million up $595,000 or 13% compared to the same period of the prior year. These increases reflect our deliberate investment in [indiscernible] as we work to our product innovation into customer and revenue growth. However, we expect these costs to come back down in 2027 as we reorganized the sales team. Product development expenses decreased 21% for both the 3 and 9 months ended September 30, 2026, as compared to the prior year. The decrease was primarily due to higher capitalized software costs. We capitalized $94,000 of software development costs in Q3 and $303,000 for the first 9 months of 2026, compared to $0 and $23,000, respectively, in the comparable periods of last year. The costs mostly reflect the investment we made in our social monitoring, insight and analytics and spot enhancements that we rolled out during the second and third quarters this year as well as some additional enhancements we have planned for the remainder of the year and into 2027. Operating loss for Q3 2026 was $142,000 compared to $184,000 in Q3 of 2025. For the first 9 months of 2026, trading loss was $1.2 million, compared to $1.1 million for the same period of 2025. The year-over-year change was primarily driven by lower gross margin, partially offset by lower operating expenses. On a GAAP basis, net loss from continuing operations was $80,000 or $0.02 per diluted share for Q3 of 2026 compared to $45,000 or $0.01 per diluted share in Q3 of 2025. For both the first 9 months of 2026 and 2025, net loss from continuing operations was $1 million or $0.27 per diluted share. On a non-GAAP basis, EBITDA was $0.7 million or 12% of revenue for Q3 2026, compared to $0.5 million or 9% of revenue in Q3 of 2025. Adjusted EBITDA for Q3 2026 was $0.8 million or 15% of revenue compared to $0.9 million or 16% of revenue in Q3 of 2025. Non-GAAP net income was $0.5 million for Q3 of 2025 or $0.14 per diluted share compared to $0.8 million or $0.20 per diluted share in the prior year quarter. Adjusted free cash flow was $375,000 for Q3 of 2026 compared to a negative $418,000 in Q3 of 2025. For the first 9 months of 2026, EBITDA was $1.2 million or 7% of revenue compared to $1 million or 6% of revenue for the first 9 months of 2025. Adjusted EBITDA was $2 million or 12% of revenue compared to $2.3 million, 14% of revenue during the same period of the prior year. Non-GAAP net income was $1.2 million or $0.32 per diluted share compared to $1.5 million or $0.39 per diluted share for the same period of last year. Adjusted free cash flow was $1.4 million compared to $0.8 million for the first 9 months of 20205. There was a significant increase in cash flow from operations during the quarter as we generated $469,000 of cash flow from operations in Q3 of 2026 compared to an outflow of $582,000 in Q3 of 2025. We ended the quarter with just under $3 million in the bank, and Brian will talk a little further about our share repurchase activity, which was ongoing during the quarter. The deferred revenue balance, which we expect to recognize over the next 12 months, was $5 million as of September 30, 2026, compared to $5.3 million at December 31, 2025. I will now turn it back over to Brian, who will talk a little further about the rollout of our new spot agents and some savings initiatives we have heading into Q4 and next year. We believe both will enable us to continue to post adjusted EBITDA in the mid-teens while generating higher cash flow from operations. Brian?

Thanks, Steve. Let me expand on a few points for the remaining part of the call. What we're seeing going into 2027, the restructuring that we completed in October, our new products and how we're positioning ACCESS Newswire for its next phase of growth. Of costs, in October, we completed a $1.5 million restructuring plan that streamlined our organization across sales, development, editorial and operations. It affected personnel in several departments and reduces our cost structure in the fourth quarter and going forward. We expect approximately $300,000 of savings to show up in the fourth quarter this year, with the full benefit being in the first quarter of 2027 and beyond. The repositioning of our business ensures that the next phase of our journey that we will remain cash flow positive, produce greater earnings power and keep adequate cash on the balance sheet to invest in growth strategies and in repurchasing our common stock. Moving along to subscriptions. The average ARR per customer, which does not include EDU, was $12,331 at the end of the quarter, up from $11,651 a year ago, a 6% increase. It's another quarter of stable ARR revenues, which reached 60% of our overall revenues for the quarter were $3.2 million. We added 115 new subscribers during the quarter, ending with 1,213 total subscribing customers. We believe that we can continue that in the fourth quarter and at the end of the year, get closer to our restated goals of 1,300 to 1,350 subscribers. Across the whole business, as of September 30, we had 14,134 customers who had an active contract during the past 12 months with us. In a softer press release market, our insights and analytics, social monitoring and Pro offerings built continued momentum and helped us grow average revenues per release. That progress is being driven by the products that we have built and brought to market over this year. Social monitoring platform and insights and analytics reports have been live since midyear. And this month, our new spot agents. Early adoption is encouraging. We expect to release additional products before the end of the year, and our focus now is turning the innovation into subscribers and revenue growth in our subscription business. We are also sharpening our product road map and go-to-market pricing centered around outcomes for our customers and what they value most. During the current quarter and to end this year, we will introduce an SMB entry plan starting at $249 a month. For smaller businesses seeking an affordable plan with options to buy up the outcomes they want in our platform. Each month that includes 1 release, 1 monitor keyword, 1 newsroom and 10 journalist pitches with 3 spot agents. The strategy is driven from the success of our insight and analytics and press release customer upgrade indicators during the storytelling process. Meaning 11% of our customers that distributed a press release in the third quarter, bought upgrades in our platform, and these are what we'll refer to as in platform or outcome-based add-ons. We expect this new SMB subscribers to generate an average ARR closer to 6,000 after outcome-based add-ons are completed. The trade-off to our current ARR will be an increase in number of subscribers per quarter as well as top line revenue growth. Our unit economics on this [indiscernible] tier plan begin at 80% gross margin, and have the ability to grow with recently announced spot agents. So let me tell you about the SPOT. SPOT stands for smart PR optimized tools. It is our newest advancement to our platform suite of AI agents that check a pressures before it goes up. We built SPOT for 1 simple reason. We have been examining the PR and IR markets for a year and have noticed that our competitors are building traditional subscriptions or AI tools around the wrong stage of a story. Look that simply a story as 3 stages before distribution, the actual distribution and after distribution. All newswires today focus on steps 2 and 3 and all other communication platforms also focus steps 2 and 3. Even the companies in the Magic Quadrant according to Gartner's report specialized in the second and the third. Those are the obvious places that we all set, which makes the moat very difficult to defend. And the first step, we believe there is significant value to us. SPOT runs in the optimized step after the release is written and before it's submitted, while the release can still change. This is where we believe there are opportunities to help improve outcomes and engagement for our customers. Distribution comes second, and our editorial teams still view every single press release. After distribution, we will be there as well with our access insights and analytics, which we launched May of this year, measuring how the story performs for each of our customers. This is why we released SPOT first step of our agents. There are several more coming over the next few months. These agents are included with every release, ACCESS Verified source verification and release timing adviser. 4 more are available as add-ons, LLM visibility scoring, readability score, earnings Audit and PR headline optimizer. These agents are built to be outcome based and give customers the ability to buy up when their outcomes matter most, and we plan to introduce lower tier subscriptions with outcome-based pricing built in. These SPOT upgrades can move gross margins from mid-70s to [indiscernible] through our improvement of ARR increasing, we would have seen growth this quarter in our top line number. We remain focused on executing our strategy over the next several quarters with renewed cost savings to shore up our bandwidth, our balance sheet and our operational costs. We are confident in what we're doing, and we invite our shareholders to come see our complete platform and strategy, book time with us and take SPOT for a test drive, see the systems that we have launched and get a peek at spot in the future. We are excited about our developments, where we see the market going and what we can do to take more market share in the coming years. Turning to capital allocation. As I mentioned earlier, we have completed a $1 million share repurchase this year, and we intend to be back in the market for the remaining part of the year with another repurchase plan approved by the Board. All this valuation with our cash generation, we believe both investing in the business and repurchasing our shares is an important part of our cap allocation strategy. With 75% gross margins, double-digit adjusted EBITDA margins, positive cash flow and minimal debt, we are in a strong financial position and expect to return to top line growth in 2027. I want to thank our teams, our customers, partners and shareholders for their trust and ongoing support. With that, I'll turn the call back to the operator for questions. Operator?

[Operator Instructions] And our first question here is Luke Horton with Northland Securities.

Just wanted to touch on, obviously, industry press release volumes being down. Could you help give us a sense of has that sort of rebounded at all here in 4Q? And what are you kind of budgeting from a volume perspective going into '27?

Luke. Yes, look, I would tell you what we have seen over the better part of the last few months, and we'll likely see this for the next 1.5 months here in Q4 is that there are a good amount of companies coming to market, trying to confuse customer decisioning around earned and paid media. [indiscernible], obviously, is an attribution of what a press release is. Earned Media is more on the pitching standpoint and having articles placed to written about you as a customer in publications like Ford or Business Insider. There's a lot of competition in that space right now, and the SMB market is driving there more so than they're driving towards a traditional pad or a press release product. We're seeing the lack of engagement come from those articles. We're watching and proving that out to customers. So we're confident that folks will come back into a traditional press release. market. That's 1 of the reasons why we're coming downstream to a smaller SMB product offering is to help spur some of that activity late this quarter and into next year?

Got it. And then just kind of following up on how you said kind of moving downstream with that lower price point entry or I would say, entry price point for the SMBs, but I think you did say you expect these to generate an average ARR closer to 6,000. I'm just wondering like how quickly do you expect to ramp that entry rate to kind of upgrades and ultimately leading to that 6,000 per customer?

Yes. When we analyze what to include in the plan and to be clear, the press release is being provided in that subscription low-end tier to start, is a newsroom article. Our newsrooms generate about 1/3 of the engagement traffic for our customers, but we do recognize that throughout the year, customers are going to have stories, product launches, executive hirings in the private sector, things that they're going to want to promote or target more. And the way the tool and the application is built is to allow them to buy up. So the assumption on price is about $3,000 base fee. Customers will spend another $3,000 a year, buying up to a national press release more targeted journalists, more brand monitoring and additional SPOT agents, if you average our current price of a press release basically equals forward the press releases throughout the year, which is conservative based on our current customer usage and only using spot agents or upgrades in app 25% of the time, gets us to about $6,500 a year. So we're confident that customers will, at a minimum, do this, and we build models accordingly and have all that to discuss and talk to folks about.

Okay. Got it. And then just lastly, I guess with all the kind of product development and new launches slated for the coming quarters, could you handicap like what are you most excited about? Or what do you think has the biggest potential?