ACCESS Newswire Inc.

Greetings, thank you for standing by, and welcome to the Issuer Direct Corporation fourth quarter and year-ended 2022 earnings conference call. Today's call will be conducted by the company's founder and chief executive officer, Brian Balberni, and its chief financial officer, Tim Petoniak. Before I turn the call over to Mr. Brian Balberni, I'd like to read to you the company's abbreviated Safe Harbor Statement. I'd like to remind you that statements made during this conference call concerning future revenues, results from operations, financial position, markets, economic conditions, product releases, partnerships, and any other statement 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. Valberni?

Thank you, Operator. Good afternoon, everyone, and thank you for joining us today to discuss the company's fourth quarter and year-end 2022 results. Shortly after the market closed, we reported record revenues of $7.1 million for the fourth quarter and $23.5 million for the full year 2022. This is a quarterly increase of 25% over fourth quarter last year and a 7% increase for the full year. It should be noted we only recognize two months of NewsWise revenues in our quarterly and full year results. Customer accounts also hit record numbers, totaling 4,691 for the quarter compared to 3,667 during the same period last year, a 28% increase. I will talk more about customers, our 2023 KPIs and subscription numbers later in the call. I'm encouraged by the entire team's efforts for our integration plans to combine both newswire and access for our editorial, distribution, back office, and sales and marketing teams into one cohesive, efficient operation. This work will enable us to recognize the full potential of growth and cost savings over the fiscal year. It was important for us to spend the first couple of months of our acquisition getting to know everyone, their day-to-day, the operations beyond what due diligence can do. By investing this time, it puts us in a good long-term position to have a full, efficient operation, cohesive plan, and an alignment of staff in tune with the right departments. I personally recognize this does have short-term impacts on results, but as everyone knows, we are a long-term focus management team that has and will continue to build stable, long-term, profitable growth at ISDR. Before I turn the call over to Tim for his prepared remarks, the quarter and full year, I want to provide an important update in regards to the short-term note we utilized to help finance the Newswire transactions. The $22 million one-year 6% seller's note has a maturity date of November 2023. We have been focused not only on the integration of the assets we acquired, but also refinancing this short-term obligation with a longer-term facility with a banking partner that meets the business needs today and in the future. The business has debt capacity, and we are looking to close what should be a five-year facility that will enable us to positively impact our bottom line and balance sheet. Additional terms of the financing will be forthcoming this month. There is a lot more to talk about today, so I'll turn the call over to Tim to cover the fourth quarter and year-end results. Tim?

Thank you, Brian, and good afternoon, everyone. As Brian mentioned, quarterly and year-end results were primarily driven by our acquisition of Newswire and growth in our AccessWire news brand, which resulted in our press release revenue increasing 65% over the prior year, while contributing to increased gross margins and enabling us to increase gross margin percentage to 74%. The Newswire acquisition further enforces our commitment to scaling our communications business, as well as continues to execute our capital allocation strategy. I will now highlight some of the financial results we achieved during the fourth quarter and full year ended 2022. During the fourth quarter of 2022, we achieved record revenues of $7.1 million, a 25% increase from $5.7 million in Q4 of 2021. For the full year, total revenue was $23.5 million. a 7% increase from $21.9 million in 2021. The increase in the quarter and year-to-date revenue was primarily driven by our communication revenue stream, partially related to the acquisition of Newswire, which is included in the communication revenues, as well as a 7% and 11% increase in revenues from our AccessWire news brand, respectively, due to an increase in average price per release. For the full year, we also have increased revenues from the licensing of our investor relations websites, and data feeds. These increases were partially offset by a decrease in events and webcasting revenue due to less demand of our virtual products as conferences and meetings began to move back to in-person during the current year. During Q4 2022 and full year 2022, communication revenue accounted for 78% and 69% of total revenue, respectively. In the prior year, communication revenue with 64% of total revenue during both Q4 and full year of 2021. Revenue from our compliance business decreased 22% for the fourth quarter and 5% during the full year compared to the same periods of 2021. The decrease was primarily related to revenue from our transfer agent business due to a reduction in market activity and corporate actions, and a decrease in revenue from our disclosure reporting and legacy ARS service due to customer attrition. The quarter was also impacted by a reduction in revenue from our print and proxy fulfillment services due to large one-time projects that did not reoccur in the current period. For the full year of 2022, these decreases were partially offset by an increase in revenue from our print and proxy fulfillment services due to large transactions and an increase in projects during the current year. Changing gears to gross margin. Our overall gross margin percentage was 74% and 76% for the fourth quarter and full year of 2022, compared to 73% and 74% for the same periods of the prior year. Gross margins from our communication business decreased 3% for the fourth quarter primarily due to higher webcasting and events revenue, which produced lower margins, as well as additional revenue from Newswire, which currently has a lower margin than our AccessWire business. As we work through synergies of the integrations, We expect gross margins between the two businesses to become aligned. For the full year, gross margins for the communication business increased 1%, which is related to an increase in revenue from our high-margin access wire business as a percentage of communication revenue. Gross margins from our compliance business increased 4% for both the fourth quarter and full year of 2022, compared to the same periods of the prior year. This increase in gross margin percentage is primarily due to lower amortization costs associated with our disclosure software, which became fully amortized in the prior year, partially offset by an increase in print, postage, and fulfillment costs associated with increased revenue from our print and proxy fulfillment services. Moving down to operating income, we posted operating income of $44,000 for the fourth quarter of 2022 compared to $698,000 during Q4 2021. For the full year, operating income decreased to $2.7 million from $3.7 million in 2021. For both periods presented, the decrease in operating income, despite an increase in revenue and gross margin, is related to an increase in operating expenses, primarily amortization expense attributed to intangible assets related to the Newswire acquisition, coupled with an increase in bad debt expense. Additionally, we experienced increase in stock compensation expense, employee-related costs, recruiting fees, and other sales and marketing expenses, all which are associated with our continued investment for future growth. G&A costs increased 24% and 20% for the three and 12 months ended December 31st of 2022 compared to the prior year due to incremental costs associated with operating the Newswire business, as well as an increase in stock compensation, bad debt expense, employee-related costs, and other corporate initiatives associated with future growth. Sales and marketing costs increased 47% and 21% for the fourth quarter and full year compared to the same periods of 2021. These increases are due to incremental costs associated with operating the newsletter business, as well as our continued investment in advertising, digital marketing spend, and automation enhancements. The increases compared to the prior year were partially offset by a reduction in sales commission, while the quarter was partially offset by a reduction in consultants. Product development costs increased 95% and 21% for the quarter and full year compared to the same periods of 2021, which is directly attributed to the additional costs associated with operating the Newswire business. It is important to note that we had an increase in depreciation and amortization costs for both the quarter and full year due to additional amortization associated with intangible assets acquired in the Newswire acquisitions. On a GAAP basis, we had a loss of $109,000, or negative $0.03 per diluted share, compared to a net income of $616,000, or $0.16 per diluted share during Q4 of 2021. Net income was $1.9 million, or $0.52 per diluted share for the full year of 2022, compared to $3.3 million, or $0.86 per diluted share in 2021. Looking at some non-GAAP metrics, EBITDA for the fourth quarter of 2022 was $589,000 or 8% of revenue compared to $987,000 or 17% of revenue during Q4 of 2021. For the full year of 2022, EBITDA was $3.7 million or 16% of revenue compared to $5.3 million or 24% of revenue during 2021. You'll notice in the release this quarter we have added a few other non-GAAP metrics such as adjusted EBITDA as well as free cash flow and adjusted free cash flow. We feel these measures provide additional useful information when reviewed along with our other non-GAAP measures and GAAP measures to help analyze results of the company as well as identify any trends. With that being said, our adjusted EBITDA for Q4 2022 was just over $1 million, or 14% of revenue, compared to $1.3 million, or 23% of revenue during Q4 2021. For the full year, adjusted EBITDA was $4.9 million, or 21% of revenue, compared to $5.5 million, or 25% of revenue. Adjustments in this measure include adding back stock compensation, acquisition and or integration expenses, and other non-recurring expenses. Non-GAAP net income was $665,000 or 18 cents per diluted share for Q4 of 2022 compared to $894,000 or 23 cents per diluted share during Q4 of 2021. For the full year of 2022, non-GAAP net income was 3.5 million or 95 cents per diluted share compared to 3.7 million or 96 cents per share in 2021. Switching over to cash flow metrics, we just completed our 32nd consecutive quarter of positive cash flows for the company. Cash flow from operations for Q4 of 2022 was $1 million compared to $1.4 million for Q4 of 2021. For the full year of 2022, cash flow from operations was $4 million compared to $4.7 million in the prior year. However, adjusted free cash flow was $2 million for Q4 of 2022 compared to $1.5 million for Q4 of 2021 and $5.1 million for the full year of 2022 compared to $4.7 million in 2021. As noted earlier, adjusted free cash flow is a new non-GAAP measure we have added that adjusts for cash paid for acquisition and or integration costs and other unusual items. The current quarter and full year ended December 31st of 2022, includes $500,000 paid for rep and warranty insurance associated with the Newswire acquisition, as well as $325,000 of payments related to Newswire opening balance sheet liabilities that were not recouped until Q1 of 2023. Lastly, our deferred revenue balance continues to climb. This is revenue we expect to recognize over the next 12 months, which increased to $5.4 million as of December 31st of 2022 compared to $3.1 million as of December 31st of 2021, an increase of approximately 75%. A majority of this increase relates to incremental deferred revenue associated with the acquisition of Newswire. I will now turn the call back 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. Brian?