ACCESS Newswire Inc.

Ladies and gentlemen, thank you for standing by and welcome to the issuer direct corporation first quarter 2023 earnings conference call. Today's call will be conducted by the company's founder and chief executive officer, Brian Balburnie, and its chief financial officer, Tim Petoniak. Before I turn the call over to Mr. Brian Balburnie, I'd like to read 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 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 that 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. Balbirney.

Thank you, Operator, and good afternoon, and thank you for joining us today to discuss the company's first quarter 2023 results. Just after the market closed today, we issued a press release announcing our results for the quarter, a copy of which is available in our newsroom for reference during today's call. I am pleased with our first quarter results. Total revenue was up 63% to $8.6 million, driven by our continued growth in our AccessWire business, as well as the Newswire acquisition. We also drove margin improvement from 77% to 79% for the quarter. Tim will cover in more detail later in the call. We have made some significant progress, both in integrations, cost savings, and new product lineups for the remaining part of 2023, something I will highlight after Tim's prepared remarks. There's a lot more to talk about today, so I'll turn the call over to Tim to cover the first quarter highlights. Tim?

Thank you, Brian, and good afternoon, everyone. As Brian mentioned, 2023 is off to a good start, driven by both sides of the business. However, we are most encouraged by the growth in our press release distribution businesses of AccessWire and Newswire, along with our increased margins and positive cash flows. I will not highlight some of the results we achieved during the first quarter. Total revenue for the first quarter of 2023 was $8.6 million, an increase of $3.3 million, or 63%, compared to $5.3 million for the same period of 2022. our communications business led the growth increasing 3.2 million or 94 to 6.6 million or 76 percent of total revenue during q1 of 2022 communication revenue accounted for 64 of total revenue the increase in revenue was driven by our acquisition of newswire for which all revenue is included in communications revenue we also generated increased revenue from our access wire business which increased 21% compared to the same period of the prior year, primarily due to an increase in average price per release. Compliance revenue increased 8% or $148,000 during the first quarter of 2023 compared to the same period of 2022. This increase was primarily related to an increase in revenue from our transfer agent services due to an increase in corporate actions during the period as well as an increase in print and proxy fulfillment services due to larger transactions and an increase in the number of projects. Switching over to gross margins, our overall gross margins increased 67% with $2.7 million to $6.8 million compared to the same period of 2022. Gross margin percentage was 79% for the first quarter of 2023 compared to 77% for the same period of 2022. Gross margins from our communications business increased from 78% in Q1 of 2022 to 79% in Q1 of 2023 due to the acquisition of Newswire, an additional scale from our AccessWire business. Gross margins from our compliance business improved from 75% to 78% during the quarter primarily related to a decrease in headcount and outsourcing costs associated with compliance services. Moving to operating income, we posted operating income of $581,000 for Q1 of 2023, compared to $688,000 during Q1 of 2022. The decrease in operating income, despite an increase in gross margins, is due to an increase in operating expenses, primarily amortization expense attributed to intangible assets acquired during the Newswire acquisition, as well as additional costs attributed to operating the Newswire business. Additionally, we had an increase in one-time transaction expenses, stock comp expense, and employee-related costs, all of which are expenses associated with our continued investment for future growth. General administrative costs increased 39% due to additional costs to operate the newswire business. one-time transaction integration costs associated with the transaction, stock compensation expense, and employee-related costs associated with investments for future growth. These increases were partially offset by a reduction in executive recruiting fees compared to the same period of 2022. Sales and marketing costs increased 88% due to the addition of the Newswire sales team. Product development cost increased 181%, directly attributed to additional cost associated with operating the Newswire business, as well as the hiring of a new chief technology officer. On a GAAP basis, we reported a net loss of $144,000, or $0.04 per diluted share, during Q1 of 2023, compared to net income of $516,000, or $0.13 per diluted share, during Q1 of 2022. I will discuss this decrease in a minute as a change compared to the same period of 2022 was impacted by additional amortization expense attributed to intangible assets acquired during the newswire acquisition, as well as an increase in one-time transaction expenses, changes in the fair value of the interest rate swap, and stock compensation expense. Looking to some non-GAAP metrics. We generated EBITDA of $782,000 for Q1 of 2023, a decrease of $68,000, or 8% compared to Q1 of 2022. As a percentage of revenue, EBITDA decreased to 9% for Q1 of 2023 compared to 16% in Q1 of 2022. However, our just fee for Q1 of 2023 increased 66% to $1.9 million compared to $1.1 million in Q1 of 2022. This increase was driven by one-time cost related to higher acquisition and integration expenses, as well as a $370,000 payment made to extinguish our note payable resulting from the Newswire transaction. We also recorded non-cash items like a $165,000 loss related to the change in fair value of our interest rate swap as well as higher stock compensation. As a percentage of revenue, adjusted EBITDA was 22% for both the first quarter of 2023 and 2022. Non-GAAP net income for Q1 of 2023 increased to 1.3 million or 33 cents per diluted share compared to $830,000 or $0.22 per diluted share in Q1 of 2022. The increase in non-GAAP net income was driven by the same items just discussed impacting adjusted EBITDA. Switching over to the balance sheet and the cash flow statement, our deferred revenue balance, which is revenue we expect to recognize primarily over the next 12 months, decreased slightly to $5.2 million as of March 31, 2023, compared to $5.4 million as of December 31, 2022. This was driven by backlog, which Brian will discuss shortly. On the cash flow statement, we generated cash flow from operations of $272,000 for Q1 of 2023, compared to $548,000 during Q1 of 2022. Cash flow from operations in the quarter was primarily impacted by a one-time payment of $370,000 related to the early termination of the note payable associated with the Newswire acquisition. This resulted in an adjusted free cash flow of $739,000 for Q1 of 2023 compared to $603,000 for Q1 of 2022. This is the 33rd consecutive quarter of positive cash flow for the company. I will now turn it back over to Brian, who will provide some updates on the business, new products in the pipeline, and everything else we have planned for the remainder of the year.