ACCESS Newswire Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Issuer Direct Corporation's second quarter 2023 earnings conference call. My name is David Tadros, host of Issuer Direct's Hello, My Name Is, an employee-driven get to know each other series whereby we feature a new employee each week or something extremely cool happening at our company. Me doing this today is our way of ensuring our shareholders get to know all of us as well. Each quarter, we will feature one of our very own here at the company to introduce our executives and read the Safe Harbor language on each call. It's my pleasure to introduce the company's founder and chief executive officer, Brian Belberny, and its chief financial officer, Tim Petoniak. Before I turn the call over to Mr. Brian Belberny, I'd like to read you the company's abbreviated Safe Harbor statement. I'd like to remind you that the 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 performances 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 in the call. The company believes a 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. Valverni.

Greetings, everyone, and thank you, David, for today's introduction. Super cool for you to be doing this today and for all of your hard work on the Hello, My Name Is series. I know when we first started talking about doing this podcast, it was employees first, but we do have plans to expand it and our brand to include customers and partners at some point. So keep up the good work, sir. We are pleased to have everyone join us today to discuss our second quarter results. Our press release, which is accessible in our newsroom, has just been released and provides the key takeaways on our performance for the quarter and first half of 2023. We are pleased with the second quarter results. Total revenue is up 67% year over year to 9.7 million, driven by both our business lines, something Tim will discuss shortly. We also delivered solid performance on earnings for the quarter, something we spoke about in our last call and earlier in the year. EBITDA increased 7% year-over-year and 21% for the prior quarter. Customers subscribing to our products also grew over 5% for the quarter, and the average price per release in our core news business also increased. These results were a direct effort of our entire team's ability to deliver on our operating plan and strategy for 2023. We recognize that we still have work to do here. Customer growth is still our number one focus of our entire organization, and we're building up a strong quarter to deliver what will be continued success in the back half of the year. As always, there's a lot more to talk about, so I will turn the call over to Tim to cover the second quarter results. Tim.

Thank you, Brian, and good afternoon, everyone. As Brian mentioned, we were able to reach a new record high for quarterly revenue and generate increased cash flow and EBITDA over the prior year. I will now highlight some of the results we achieved during the quarter. Total revenue for the second quarter of 2023 was $9.7 million, an increase of 66%, compared to $5.8 million for the same period of 2022. For the six months ending June 30th of 2023, total revenue was $18.3 million, an increase of 65% from $11.1 million for the first half of 2022. The increase for both periods was primarily driven by our communications business, increasing 2.2 million, or 61%, and $5.4 million, or 77%, for the three and six months ending June 30th of 2023, respectively. Communication revenue represents 62% and 68% of total revenue during the three and six-month periods ending June 30th of 2023, compared to 64% for the same periods of 2022. The increase in revenue is driven by the acquisition of Newswire, for which all revenue is included in the communication revenue. For the first half of 2023, we also generated increased revenue from our AccessWire business, which increased 10% compared to the same period of the prior year, primarily due to an increase in average price per release. The increase for the three- and six-month ending period June 30th of 2023 was partially offset by a decrease in revenue from our webcasting and events business. Compliance revenue increased 76%, or $1.6 million, and 43%, or $1.7 million, during the three and six months ended June 30th of 2023, compared to the same periods of 2022. This increase was primarily related to an increase in revenue from our print and proxy fulfillment services business due to a few significant transactions which occurred during the period, as well as an increase in revenue from our transfer agent services due to an increase in corporate actions and directives during the period. Switching over to gross margins, our overall gross margin percentage was 76% and 77% for the second quarter and first half of 2023, respectively, compared to 77% for the same periods of 2022. Gross margins from our communications business were 76% and 77% for the three and six months ending June 30th of 2023, compared to 80% and 79%. in the same periods of 2022. The decrease in gross margin percentages for the periods is primarily due to an increase in distribution costs as we continue to expand our global footprint. Moving to operating income, we posted operating income of $1.7 million for Q2 of 2023 compared to $1.1 million in Q2 of 2022. Operating income was $2.3 million for the first half of 2023 compared to $1.8 million during the first half of 2022. The increase in operating income is primarily due to an increase in revenue partially offset by an increase in cost of revenue and operating expenses. I will now discuss the items impacting the change in operating expenses. General administrative costs increased 45% and 42% during the second quarter and first half of 2023, respectively. The increase is primarily driven by additional expenses associated with costs to operate the Newswire business, one-time transaction integration costs, employee-related expenses, and stock compensation expense. The increase for the first half of 2023 was partially offset by a reduction in recruiting fees. Moving on to sales and marketing. Sales and marketing costs increased 49% for the second quarter and 68% for the first half of 2023 compared to the same periods of 2022. This is due to the addition of the Newswire sales team. Finally, product development. Product development costs increased 149% and 167% during the three and six months ended June 30th of 2023, compared to the same periods of 2022. This increase is directly attributed to additional costs to operate the Newswire business as well as the hiring of our new chief technology officer. It's important to note that during the three and six months ended June 30th of 2023, we capitalized $167,000 in costs related to building our new artificial intelligent writer that you know as Amy, as well as upgrading our media database product. Operating expenses were also impacted by an increase in amortization expense attributed to intangible assets acquired in the newswire acquisition. On a GAAP basis, during Q2 of 2023, we generated net income of $1.4 million, or $0.36 per diluted share, compared to $841,000, or $0.22 per diluted share during Q2 of 2022. Net income for the first half of 2023 was $1.2 million, or $0.32 per diluted share, compared to $1.4 million, or $0.36 per diluted share during the first half of 2022. Net income for the three and six months ended June 30th of 2023 was impacted by operating expense items discussed previously, as well as additional interest expense associated with the Newswire acquisition. These increases were partially offset by income resulting from the change in the fair value of our interest rate swap and interest income. Additionally, the six months ended June 30th of 2023 was impacted by a payment to extinguish our note payable resulting from the Newswire transaction. Looking to some non-GAAP metrics, EBITDA for Q2 of 2023 was 2.9 million, or 30% of revenue, compared to 1.3 million, or 23% of revenue, in Q2 of 2022. For the first half of 2023, EBITDA was 3.6 million, or 20% of revenue, compared to 2.2 million, or 19% of revenue, during the first half of 2022. Adjusted EBITDA for Q2 of 2023 was $3 million, or 31% of revenue compared to $1.5 million or 26% of revenue for the same period of 2022. Adjusted EBITDA for the first half of 2023 was $4.9 million or 27% of revenue compared to $2.6 million or 24% of revenue for the first half of 2022. Non-GAAP net income for Q2 of 2023 was $2 million, or 53 cents per diluted chair, compared to $1.1 million, or 29 cents per diluted chair, during the same period of 2022. Non-GAAP net income for the first half of 2023 was $3.3 million, or 87 cents per diluted chair, compared to $1.9 million, or 50 cents per diluted chair, during the first half of 2022. The increase in our non-GAAP metrics for the three and six months ended June 30th of 2023 were driven by the positive results of the business as I discussed earlier in my remarks. Switching over the balance sheet and cash flow statements, our deferred revenue balance, which is revenue we expect to recognize over the next 12 months, increased to $5.7 million as of June 30th of 2023 compared to $5.4 million as of December 31st of 2022. On the cash flow statement, we generated cash flow from operations of $1.7 million and $2 million for the three and six months ended June 30th of 2023, respectively, compared to $1.1 million and $1.6 million during the same periods of 2022. Adjusted free cash flow was $1.8 million and $2.5 million for the three and six months ended June 30th of 2023, respectively, compared to $1.1 million and $1.7 million for the same periods of 2022. This is our 34th consecutive quarter of positive cash flow for the company. I will now hand it back to Brian, who will provide some updates on the business, new products in the pipeline, and everything else we have planned for the second half of the year. Brian? Brian?