Issuer Direct Corporation (ACCESSWIRE brand) — Q2 2022 Form 10-Q Summary
Business context and reporting period
The filing is Issuer Direct Corporation’s unaudited Form 10-Q for the quarter and six months ended June 30, 2022, filed August 4, 2022. The company provides cloud-based communications and compliance technology through its Platform id. offerings. Revenue is reported in two streams: Communications and Compliance. ACCESSWIRE news distribution is a principal Communications product.
The company reported 3,611,010 common shares outstanding as of August 4, 2022. It is a smaller reporting company listed on NYSE American under ISDR.
Financial performance and condition
| Metric | Three months ended June 30, 2022 | Six months ended June 30, 2022 |
|---|---|---|
| Revenue | $5.807 million | $11.095 million |
| Gross profit | $4.443 million | $8.499 million |
| Gross margin | 77% | 77% |
| Operating income | $1.148 million | $1.836 million |
| Net income | $841,000 | $1.357 million |
| Diluted EPS | $0.22 | $0.36 |
- Approximate operating margins were 19.8% for the quarter and 16.5% year to date; approximate net margins were 14.5% and 12.2%, respectively.
- Communications revenue was $3.691 million for the quarter and $7.074 million year to date, representing 63.6% and 63.8% of total revenue. Communications gross margins were 80% and 79%.
- Compliance revenue was $2.116 million for the quarter and $4.021 million year to date. Compliance gross margins were 71% and 73%.
- Cash and cash equivalents were $21.458 million at June 30, 2022, compared with $23.852 million at December 31, 2021. Net accounts receivable was $3.484 million.
- Current assets of $26.065 million exceeded current liabilities of $6.048 million by $20.017 million.
- Net cash provided by operating activities was $1.644 million for the first six months, compared with $2.081 million in the prior-year period.
- Investing activities used $38,000, primarily for fixed assets. Financing activities used $3.983 million, including $4.041 million for share repurchases.
- The company had an unused $3.0 million unsecured line of credit bearing interest at 2.84% as of June 30, 2022. No borrowings were outstanding.
- Lease liabilities totaled $1.864 million, including $1.501 million classified as long term. Deferred revenue was $3.481 million and is expected to be recognized within one year.
Material changes versus the prior comparable period
- Quarterly revenue increased 2% and six-month revenue increased 4%, primarily due to Communications growth.
- ACCESSWIRE revenue increased approximately 16% in both the quarter and year-to-date periods. Communications revenue increased 5% for the quarter and 6% year to date.
- Compliance revenue declined 4% for the quarter and was approximately flat year to date, reflecting lower transfer-agent, disclosure, and legacy annual-report-service revenue, partly offset by higher print and proxy fulfillment activity.
- Cost of revenues decreased 8% for the quarter and 10% year to date, increasing gross margin from 74% to 77% for the quarter and from 73% to 77% year to date.
- General and administrative expense increased 24% for the quarter and 22% year to date, driven by higher stock-based compensation, corporate investment, and a one-time executive recruiting fee in the first half.
- Sales and marketing expense increased 13% for the quarter and 15% year to date due to additional headcount, advertising, and digital marketing spending.
- Net income decreased 24% for the quarter and 18% year to date, despite higher revenue and gross profit, because operating expenses and income tax expense increased.
- The company repurchased 169,401 shares for $4.041 million during the first six months under a new $5.0 million authorization, leaving $959,000 available at June 30, 2022. Shares outstanding declined from 3,793,538 at December 31, 2021 to 3,646,902 at June 30, 2022.
Guidance, outlook, commentary, risks, and unusual items
- The filing does not provide quantitative revenue or earnings guidance. Management expects stable to increased demand for ACCESSWIRE and continued investment in Communications products, sales and marketing, technology, acquisitions, and platform subscriptions.
- Management noted lower demand for webcasting, virtual events, annual meetings, and related services as customers returned to in-person activity or used internal solutions.
- COVID-19 remains a stated risk, including potential disruption to operations, customer deterioration, reduced demand, and customer payment difficulties. The company’s customer base is concentrated among middle-, small-, and micro-cap companies.
- Other risks include competition, economic and capital-market conditions, customer acceptance of products, dependence on distribution partners, foreign currency exposure, and continued attrition in legacy physical annual-report services.
- The company reported no material litigation, no material changes to previously disclosed risk factors, and no material off-balance-sheet arrangements.
- Cash balances exceeded FDIC insurance limits by $18.843 million at June 30, 2022; the company also held $2.050 million in Canada and $52,000 in Europe.
- Income tax expense was $327,000 for the quarter and $501,000 year to date. Management attributed the effective tax rate variance from the 21% U.S. statutory rate primarily to state taxes and GILTI expense, partly offset by foreign tax credits.
- Management concluded that disclosure controls and procedures were effective and that there were no material changes in internal control over financial reporting.
Important facts for investors to verify
- Reconcile the filing’s legal registrant, Issuer Direct Corporation, with the requested ACCESS Newswire Inc. identifier and confirm the intended issuer.
- Assess whether ACCESSWIRE growth can offset declines in webcasting, transfer-agent, disclosure, and legacy annual-report services.
- Monitor operating-expense growth, particularly stock compensation, executive recruiting, sales and marketing, and other investments intended to support future growth.
- Evaluate cash-flow conversion as share repurchases reduce cash while operating cash flow declined year over year.
- Track remaining authorization under the $5.0 million repurchase program and the effect of repurchases on per-share results.
- Review customer credit quality, the $802,000 allowance for doubtful accounts, and cash held above insurance limits.
- Review the 2021 Form 10-K risk factors and subsequent filings for updates regarding COVID-19, distribution partners, acquisitions, competition, and capital-market conditions.