ACCESS Newswire Inc. (Issuer Direct Corporation) — Form 10-Q Summary
Reporting period: Three and six months ended June 30, 2021; filed August 5, 2021. The filing identifies the registrant as Issuer Direct Corporation, which operates the ACCESSWIRE brand. Financial statements are unaudited and presented under U.S. GAAP.
Business context
The company provides communications and compliance technology and services through its cloud-based Platform id. offering. Communications products include ACCESSWIRE news distribution, webcasting, virtual events, investor-relations websites and conference software. Compliance products include disclosure software, stock transfer, proxy and annual-meeting services, and shareholder distribution.
Management is transitioning toward a communications-focused, cloud-based subscription model. Communications represented 62.6% of first-half 2021 revenue, compared with 60.9% in the prior-year period.
Financial performance and liquidity
| Metric | Three months ended June 30, 2021 | Three months ended June 30, 2020 | Six months ended June 30, 2021 | Six months ended June 30, 2020 |
|---|---|---|---|---|
| Revenue | $5.720 million | $4.884 million | $10.700 million | $8.900 million |
| Gross profit | $4.240 million | $3.522 million | $7.826 million | $6.285 million |
| Gross margin | 74% | 72% | 73% | 71% |
| Operating income | $1.361 million | $1.001 million | $2.068 million | $1.249 million |
| Net income | $1.106 million | $0.772 million | $1.651 million | $0.998 million |
| Diluted EPS | $0.29 | $0.21 | $0.43 | $0.26 |
| Net cash provided by operating activities | Not separately provided | Not separately provided | $2.081 million | $2.079 million |
Revenue growth: Second-quarter revenue increased 17% year over year, while first-half revenue increased 20%. Communications revenue increased 16% in the quarter and 24% year to date. Compliance revenue increased 18% in the quarter and 15% year to date.
Profitability: First-half gross profit increased 25%, and operating income increased approximately 66%. Net income increased approximately 65% for the first half. The gross-margin improvement reflected stronger transfer-agent revenue, lower disclosure-software amortization and lower postage and fulfillment costs.
Operating expenses: First-half general and administrative expense increased 10%, sales and marketing expense increased 24%, and product-development expense increased 41%. Product-development spending is expected to increase relative to prior periods.
Cash and liquidity: Cash and cash equivalents were $21.159 million at June 30, 2021, compared with $19.556 million at December 31, 2020. Net accounts receivable was $3.599 million, current liabilities were $5.489 million, and working capital was $19.751 million.
Cash flow and capital allocation: First-half operating cash flow was $2.081 million. Investing cash outflows were $0.201 million, including $0.161 million of capitalized software development. Financing cash outflows were $0.233 million, including $0.452 million for share repurchases, partly offset by $0.219 million from option exercises.
Debt and obligations: The company had no borrowings under its $3.0 million unsecured line of credit at June 30, 2021. The line bears interest at LIBOR plus 1.75%; the stated rate was 1.84%. Lease liabilities totaled $2.190 million, including $1.815 million classified as long term.
Material changes versus the prior comparable period
- Revenue increased $0.836 million, or 17%, in the second quarter and $1.800 million, or 20%, in the first half.
- ACCESSWIRE revenue increased 30% in the second quarter and 34% in the first half, driven by higher average pricing per release and increased volume.
- Communications gross margin was 75% in the quarter and 74% year to date, while Compliance gross margin improved to 72% in both periods from 68% and 66%, respectively.
- The company signed 36 new Platform id. licenses in the quarter and 86 year to date. Total subscriptions increased to 403, with annual contract value of $3.337 million, versus 341 subscriptions and $2.677 million at December 31, 2020.
- Deferred revenue increased 22% to $2.699 million from $2.212 million at December 31, 2020, and is expected to be recognized within one year.
- The company began removing unlimited newswire subscriptions to preserve per-unit pricing. This is expected to reduce reported active Platform id. subscriptions, although management stated that most affected customers remain active purchasers of release packages.
- The company capitalized $0.161 million of development costs for its Newsroom product, which launched at the beginning of the third quarter of 2021.
- The company implemented a new accounting system during the first half of 2021. Management reported no significant implementation issues and concluded that disclosure controls were effective.
Guidance, outlook, risks and unusual items
The filing does not provide quantitative revenue or earnings guidance. Management intends to expand Communications products, sales and marketing, newswire distribution and technology investments, pursue strategic acquisitions, grow the customer base and generate sustainable profitability and operating cash flow.
Management reported stable demand across most served markets but cautioned that COVID-19 could disrupt operations, reduce customer spending and impair customers’ ability to pay. Demand for virtual events and meetings increased during the pandemic, but the company expects demand for virtual annual meetings and related offerings to decline from pandemic-era levels. The company plans to repackage its annual-meeting offering as a self-service product in 2022.
Other risks include competition, dependence on news-distribution partners, exposure to small-, middle- and micro-cap customers, customer credit deterioration, fluctuations in transfer-agent and print/proxy activity, foreign-currency effects, and uncertainty regarding acceptance of new products. Cash deposits exceeded FDIC insurance limits by approximately $19.709 million at June 30, 2021.
The company reported no material litigation, no material changes to previously disclosed risk factors, no material off-balance-sheet arrangements and no unregistered equity sales during the reporting period. The share-repurchase program was completed by March 31, 2021, after repurchasing 179,845 shares for approximately $2.0 million in total.
Important facts for investors to verify
- Reconcile the filing’s legal registrant name, Issuer Direct Corporation, with the requested company name, ACCESS Newswire Inc., and confirm the relevant corporate and trading relationship.
- Assess whether ACCESSWIRE revenue growth and higher release pricing can offset the expected reduction in unlimited subscriptions.
- Monitor Platform id. subscription growth, annual contract value, deferred revenue conversion and customer retention.
- Evaluate the sustainability of gross-margin improvement and the effect of increased sales, marketing and product-development investment.
- Assess the duration and post-pandemic demand for virtual events, webcasting and virtual annual meetings.
- Review liquidity exposure from uninsured cash balances, customer receivables and the company’s dependence on distribution partners.
- Confirm the renewal status and terms of the $3.0 million line of credit, including the stated LIBOR-based rate.
- Consider execution risk associated with the new accounting system, Newsroom launch, planned 2022 self-service meeting product and potential acquisitions.