Issuer Direct Corporation Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022; filed March 2, 2023. The filing is by Issuer Direct Corporation, which operates the ACCESSWIRE and Newswire brands. The source does not identify the registrant as “ACCESS Newswire Inc.”
Business Context
Issuer Direct provides communications and compliance solutions for public and private companies, investor-relations and public-relations professionals, investment banks, and other service providers. Its principal revenue categories are Communications and Compliance. Communications includes ACCESSWIRE and Newswire press-release distribution, media databases, newsrooms, webcasting, events, investor-relations websites, and related technology. Compliance includes disclosure software and services, stock transfer, proxy voting, annual-report distribution, and shareholder services.
On November 1, 2022, the Company acquired iNewswire.com LLC, branded as Newswire, for approximately $43.5 million, consisting of $18.0 million cash, a $22.0 million secured promissory note, and 180,181 shares valued at $3.9 million, net of a $0.35 million working-capital adjustment. Newswire contributed only two months of operating results to 2022.
Financial Performance and Key Metrics
| Metric, in $000s except per-share data | 2022 | 2021 | Change |
|---|---|---|---|
| Revenue | $23,514 | $21,883 | 7.5% |
| Gross margin | $17,830 | $16,135 | 10.5% |
| Gross margin percentage | 75.8% | 73.7% | Up approximately 2.1 points |
| Operating income | $2,669 | $3,743 | Down 28.7% |
| Net income | $1,934 | $3,291 | Down 41.3% |
| Diluted earnings per share | $0.52 | $0.86 | Down |
| Net cash from operations | $4,019 | $4,731 | Down 15.0% |
| Free cash flow, non-GAAP | $3,953 | $4,454 | Down 11.2% |
| Adjusted free cash flow, non-GAAP | $5,122 | $4,732 | Up 8.2% |
| Adjusted EBITDA, non-GAAP | $4,867 | $5,467 | Down 11.0% |
Communications revenue increased 14.6% to $16.115 million and represented 68.5% of total revenue, compared with 64.2% in 2021. Compliance revenue decreased 5.4% to $7.399 million. ACCESSWIRE revenue increased 11%, driven primarily by higher average pricing per release, while webcasting and events declined as customers returned to in-person meetings.
Operating expenses increased 22.3% to $15.161 million. General and administrative expense rose 20% to $6.963 million, sales and marketing rose 21% to $5.922 million, product development rose 21% to $1.306 million, and depreciation and amortization rose 61% to $0.970 million, primarily because of the Newswire acquisition and related investments.
Deferred revenue increased 75% to $5.405 million at year-end from $3.086 million, primarily due to Newswire and higher subscription activity. No customer represented more than 10% of revenue or year-end accounts receivable.
Balance Sheet, Debt, Liquidity, and Cash Flow
- Cash and cash equivalents were $4.832 million at December 31, 2022, compared with $23.852 million at December 31, 2021.
- Net accounts receivable was $2.978 million; total current assets were $9.420 million.
- Total current liabilities were $31.191 million, including the $22.0 million Newswire note payable. Current liabilities exceeded current assets by $21.771 million.
- The Newswire secured note bears 6% annual interest and matures November 8, 2023. Management stated that it was actively pursuing refinancing and expected to refinance the note based on historical cash generation and Newswire operations.
- The Company had an undrawn $3.0 million unsecured line of credit at December 31, 2022, with an interest rate of 5.81% and a two-year term from October 3, 2021.
- Cash used in investing activities was $18.029 million, including $17.963 million for the Newswire acquisition. Cash used in financing activities was $4.909 million, including $5.0 million of share repurchases.
- The Company paid no dividends in 2022 or 2021.
- Total assets increased to $66.325 million from $39.257 million, primarily due to the acquisition. Goodwill was $22.498 million and intangible assets were $32.231 million at year-end.
Material Changes and Unusual Items
- The Newswire acquisition materially increased Communications scale, goodwill, intangible assets, deferred revenue, and debt. The purchase-price allocation remained preliminary at year-end.
- Newswire added approximately $16.122 million of goodwill and $30.6 million of identified intangible assets in the preliminary allocation.
- 2022 included $0.763 million of stock-based compensation, $0.263 million of acquisition and integration costs, $0.090 million of executive recruiting expense, and $0.049 million of termination benefits.
- 2021 benefited from a $0.366 million employee retention credit under the CARES Act; no comparable benefit was recorded in 2022.
- The Company repurchased 207,964 shares for $5.0 million during 2022, completing the authorized repurchase program.
- Management reported effective disclosure controls and effective internal control over financial reporting. Because the Company is a smaller reporting company, its independent auditor did not provide an attestation opinion on internal control over financial reporting.
- The independent auditor issued an unqualified opinion on the consolidated financial statements. Revenue recognition and valuation of Newswire acquired intangible assets were identified as critical audit matters.
Outlook, Commentary, and Risks
Management expects stable to increased demand for ACCESSWIRE and continued growth in Communications. Strategic priorities for 2023 include integrating Newswire with ACCESSWIRE, expanding the subscription platform, increasing sales and marketing, broadening newswire distribution, investing in technology, evaluating acquisitions, and generating profitable growth and operating cash flow. Management cautioned that this outlook is subject to economic conditions, inflation, higher interest rates, capital-market activity, competition, and customer demand.
Key risks include the ability to refinance the $22.0 million note before its November 2023 maturity; integration and realization of synergies from Newswire; dependence on key news-distribution partners and technology infrastructure; cybersecurity, privacy, and data-protection exposure; intense competition and pricing pressure; customer renewal and subscription expansion rates; seasonality in compliance and proxy-related activity; regulatory changes affecting SEC filings and communications; dependence on key personnel; and potential impairment of goodwill or acquired intangible assets.
The Company maintained a representation-and-warranty insurance policy related to the Newswire acquisition, covering potential indemnification claims up to an aggregate $12.9 million subject to a $0.4 million retention. The filing reports no material pending litigation or off-balance-sheet arrangements.
Important Facts for Investors to Verify
- Confirm the identity discrepancy between the requested company name and the filing registrant, Issuer Direct Corporation, ticker ISDR.
- Review the refinancing status, maturity terms, collateral, and any subsequent amendments or repayment of the $22.0 million Newswire note.
- Assess Newswire’s full-year contribution, customer retention, operating profitability, and integration progress, because 2022 includes only two months of reported results.
- Evaluate the preliminary valuation of Newswire goodwill, trademarks, technology, and customer relationships and the sensitivity of those assets to impairment.
- Reconcile GAAP results with non-GAAP adjusted EBITDA, free cash flow, and adjusted net income, including the excluded acquisition, compensation, recruiting, and other unusual items.
- Monitor cash balances, operating cash flow, deferred revenue conversion, customer renewals, and the Company’s ability to fund debt obligations and continued investment.
- Review cybersecurity controls, key distribution-partner agreements, regulatory developments, and the Company’s future dividend and share-repurchase policy.