ACCESS Newswire Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Issuer Direct Corporation third quarter 2021 earnings conference call. Today's call will be conducted by the company's founder and chief executive officer, Brian Balberny, and its chief financial officer, Stephen Nehr. Before I turn the call over to Mr. Brian Balberny, I'd like to read you the company's abbreviated safe harbor statement. I'd like to remind you, that statements made in this conference call concerning future revenues, results from operations, financial positions, markets, economic conditions, product releases, partnerships, and any other statements that may be construed as a prediction of future performance or events are forward-looking statements, which may involve known and unknown risks, uncertainties, and other factors, which may cause actual results to differ materially from those expressed or implied by such statements. Non-GAAP results will also be discussed on the call. The company believes the presentation of non-GAAP information provides useful supplementary data concerning the company's ongoing operations and is provided for informational purposes only. With that said, Mr. Bob Ernie.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us today to discuss the company's third quarter results. At the market close, we issued a press release announcing our results for the quarter. During today's call, we will reference these results as well as discuss the remaining quarter of this year. For your convenience and reference, a copy of the press release is now available in our newsroom at newsroom.issuerdirect.com. We are pleased with the results for the quarter. Our communications business continues to show strong signs of growth, while our compliance business continues to benefit from both regulatory and strong capital markets activities. Q3 revenues were up 12% over the prior year to $5.5 million compared to $4.9 million in Q3 of last year. Total revenues for the nine months ended September 30th were up 17% to $16.2 million from $13.8 last year. Steve will expand upon the results for the quarter in a few minutes. Changing gears to customers, on a year-over-year basis, our total customer counts grew 14% for the quarter, from 3,072 to 3,498. Our private customers grew to 1,815 from 1,597 in the prior year, and our public companies also grew to 1,683 from 1,475 also in the prior year. There is no doubt that regardless how we look at our business, from a COVID-adjusted basis or not, our customers continue to grow year over year, and in many product categories, our sequential revenues continue to grow. As an example, AccessWire grew double-digit sequentially to over 30% year over year for the third quarter. However, our indirect private customers slowed during the quarter due to our strategic decision to end relationships with certain resellers. We do not believe this will impact our ability to continue to gain customers and reach our customer goals going forward. Our direct customers in this category continue to show strong signs of growth. In fact, and because our brand is further strengthening, our average price of release has increased for the third quarter. We are of the opinion we want to own the customer journey, more so now than ever, and it is important to make these small changes in our business today as we invest for long-term, continued, sustainable growth. I will let Steve talk you through the numbers, and after his prepared remarks, we can discuss the business and what's ahead for the quarter and next year. Steve.

Thank you, Brian, and good afternoon, everyone. The third quarter was another solid quarter for us as we continue focusing on growing our communications business. AccessWire continues to help drive overall revenue and subscription growth and expand margins, something I will touch on in a little bit. We also continue to invest in our sales and marketing and product development teams and launched our newsroom product midway through the quarter, which we believe will help further increase sales of AccessWire and subscriptions of Platform ID. Total revenue for the third quarter of 2021 was $5,465,000, an increase of $583,000, or 12%, compared to $4,882,000 in Q3 of 2020. For the nine months ended September 30th, 2021, total revenue was $16,165,000, an increase of 2.4 million or 17% from the first nine months of 2020. The increase was due to double digit increases in both our communications and compliance revenue streams. I'll begin with the communications revenue stream, which generated $3,686,000 in revenue an increase of $330,000, or 10%, compared to Q3 of 2020. For the nine months ended September 30th, 2021, communications revenue was $10,383,000, an increase of $1.6 million, or 18%, compared to the same period of the prior year. The increase in revenue is driven by our AccessWire branded newswire, which drove both standalone press release revenue and also new subscriptions of platform IDs. AccessWire revenue increased 31% and 37% for the third quarter and first nine months of 2021 compared to the same periods of 2020 due to an increase in volume and revenue per release. As Brian and I will talk about further, over the past couple of quarters, we have been moving customers from our unlimited press release plans to bundles of releases, which we have seen has increased revenue per release and also helped to drive revenue per customer of our AccessWire product. This has led to some customers moving from what we define as platform subscriptions However, in a majority of those cases, we were able to maintain or increase customer spend with their new package offering. Speaking of platform subscriptions, we also continue to generate increased revenue from licenses of platform ID. During the third quarter, we signed 40 new contracts with annual contract value, or ACV, of $306,000, bringing our overall contracts to 418 with an ACV of approximately $3.5 million. This compares to 341 contracts with an ACV of approximately $2.7 million at the beginning of 2021. It reflects an increase in average revenue per contract, which is $8,373 as of September 30th, 2021, compared to $7,850 as of December 31st, 2020. During Q3 2021, communications revenue accounted for 67% of our total revenue and 64% of total revenue for the first nine months of 2021. In the prior year, communications revenue was 69% and 64% of total revenue, respectively. The decrease in communications revenue as a percentage of overall revenue was partially due to lower revenue from our webcasting and events products, as well as a higher-than-expected increase in compliance revenue due to market activity. Compliance revenue increased $253,000, or 17%, and $777,000, or 16%, during the three- and nine-month periods ended September 30, 2021, as compared to the same periods of 2020. Both the capital markets and corporate transactions sparked an increase in revenue from both print and proxy fulfillment services as well as transfer agent services. Due to the reliance on the markets and timing of certain projects, revenue from these services tends to fluctuate from quarter to quarter. Moving on to gross margin, our overall gross margin increased 18% for $615,000 and 22% for $2,156,000 during the three and nine months ended September 30th, 2021 compared to the same periods of the prior year. Overall gross margin percentage was 75% for the third quarter of 2021 and 74% for the first nine months of 2021 compared to 72% and 71% for the same periods of last year. Gross margin from our communications business increased to 78% for the quarter and 75% year to date compared to 74% and 73% for the same periods of the prior year. The increase is due partly to product mix as a higher percentage of communications revenue came from our press release business compared to lower margin webcasting business. Additionally, we experienced lower distribution and teleconference costs during the quarter. Gross margin percentage from our compliance business improved to 69% and 71% for the third quarter of 2021 and the first nine months of 2021, respectively, from 67% during the same periods of the prior year. The increase in compliance margin is due to the increase in transfer agent revenue on a relatively fixed cost base, as well as a decrease in amortization of our compliance software. Continuing on to operating income, our operating income was $977,000 for the third quarter of 2021, compared to $1,076,000 during Q3 of 2020. For the nine months ended September 30th, 2021, operating income increased 31% to $3,045,000 from $2,325,000 during the first nine months of 2020. For the third quarter of 2021, the decrease in operating income was due to an increase in operating expenses due to continued investment, primarily in our sales and marketing and product development teams. Sales and marketing costs increased 39% during the third quarter and 29% year-to-date due to increased headcount and higher sales commissions. Product development costs increased 76% for the quarter and 54% year-to-date compared to the same periods of the prior year also due to an increase in headcount of our development team. We also capitalized $54,000 of costs related to the development of our newsroom product. On a GAAP basis, during Q3 2021, we generated net income of $1,024,000, or 27 cents per diluted share, compared to $789,000, or 21 cents per diluted share during Q3 of 2020. Net income was $2,675,000, or 70 cents per diluted share for the first nine months of 2021, compared to net income of $1,787,000, or 47 cents per diluted share for the first nine months of 2020. Included in net income for both the three and nine months ended September 30th, 2021, the benefit of $366,000 related to the filing of our employee retention credits under the CARES Act. Looking at some non-GAAP metrics, EBITDA for the second quarter of 2021 was $1,632,000 for 30% of revenue, compared to $1,401,000, or 29% of revenue, during Q3 of 2020. For the first nine months of 2021, EBITDA was $4,265,000, or 26% of revenue, compared to $3,377,000, or 25% of revenue during the first nine months of 2020. EBITDA for the three and nine months ended September 30, 2021, includes the ERC credits I just spoke about. Non-GAAP net income was $906,000, or 24% per diluted share, for Q3 of 2021, compared to $963,000, or 26 cents per diluted share, during Q3 of 2020. For the first nine months of 2021, non-GAAP net income increased to $2,778,000, or 73 cents per diluted share, compared to $2,334,000, or 62 cents per diluted share, during the first nine months of 2020. On the cash flow statement, we continue to generate positive cash flow from operations as we generated $1,238,000 during the quarter compared to $1,321,000 in the prior year. The first nine months of 2021, cash flow from operations amounted to $3,319,000 compared to $3,400,000 during the prior year. Slight decrease in cash flow from operations is due to the investment in our sales and marketing and product development teams I spoke about earlier. On the balance sheet, our deferred revenue balance, which is revenue we expect to recognize primarily over the next 12 months, increased to $2,696,000 as of September 30, 2021, compared to $2,212,000 as of December 31, 2020, an increase of 22%. We are now looking to finish the year strong with record annual revenue. The sales team is hitting its stride, bringing in new platform subscriptions, and revenue from our AccessWire platform continues to grow. We also begin to look to new sales of our newsroom product to aid in increasing overall revenue. Lastly, we will continue to push for overall customer, EBITDA, and cash flow growth. Thank you for your time. I'll now hand it back over to Brian, who will provide some updates on the business, our new products, and everything else we have planned for the remainder of the year and start of 2022. Brian?