Q1 2020 Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to the issuer Direct Corporation first quarter 2020, <unk> earnings Conference call.
Today's call will be conducted by the company's founder and Chief Executive Officer, Brian Bell, Bernie and its Chief Financial Officer Steepener.
Before I turn the call over to Mr., Brian Bell Bernie I'd like to read the Companys, abbreviated Safe Harbor statement.
I'd like to remind you that statements made in 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 [noise].
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 has provided for informational purposes only.
With that said Mr Bell Bernie.
Thank you operator, welcome everyone and thank you for joining us this afternoon.
The American close we issued a press release announcing a results with the first quarter.
A copy of the press release is now available in our Investor Relations section of our website and it is also one or access more newsroom for your reference during today's call.
We ended the quarter, making it a priority to predict or employees their families in our communities or work from home prices began at the beginning of March and our New York Office and by mid March in Florida in our corporate offices your line.
There's work from one policy still remains in effect and likely will continue throughout Q2.
Our team is doing an outstanding job injuring or customers continue to receive their excellent care and we're also gaining new customers. During this time, which is extremely important our growth strategy.
We will talk more about where we're seeing the growth and the impacts we believe it will have an or business a bit later.
We're pleased with the first quarter in several ways.
First Q1 2020 is the final quarter, there were reporting year over year revenue comparisons against prior year revenues that included a full quarter of the discontinued commentary segment of our press release business.
Removing the $335000. It does continue commentary business revenue in Q1 2019, our total revenue was the first quarter 2020 grew by 4% and year over year Accesswire would have grown 36%.
We're pleased that our Q1 2020, EBITDA increased 11% and net income grew by 10% year over year.
We have created and released at the ended the quarter two new virtual product offerings to address the conference in annual meeting businesses that we have something to we'll talk about here shortly.
There will be portions of today's call were Steve and or I will point too uncertain unknown are determined to times that being said we are not panicking, we're not changing our business are putting our heads in the sand we have advocated to our customers now more than ever. If you can tell your story demonstrate your shareholders stakeholders the value of your business, regardless, where.
There is a product advancement earnings or even a human element by providing an update on what your business is doing a need unprecedented times.
Thankfully, we have a great story to tell over the last 60 days, we've increased our marketing efforts to talk about how we can help the market, we serve walton products advice and guidance.
These visible in targeted marketing pieces have helped our business in the last several weeks and is putting us on a great position for the back half of the year.
Now I'll turn the call over to Steve for a review of our first quarter and after that is details I'll come back and talk about customer counts for the period as well as Arpus and some key metrics that we're tracking for the first quarter and into the rest of the year Steve.
Thank you, Brian and good afternoon, everyone first of all I hope everyone. On this call is staying safe and healthy and continues to do so.
These are certainly exceptional times the business environment continues to change on a daily basis.
This is no different reassure direct as Brian mentioned essentially closed our offices that all employees to work remotely in mid March.
However, as a company we didn't skip a beat it continued to upgrade and develop our products gained new customers and deliver exceptional service im very proud of our employees and how they have handle the situation.
Jumping into the results of the quarter total revenue for the first quarter 2020 was $4.016 million decrease of $163000 or 4% compared to 4 billion $179000 for the same period of 2019.
For the technology revenue increased $20000 for 1% for the first quarter of 2020 as compared to the first quarter 2019.
The increase was primarily due to an increase in subscriptions of platform I'd signed over the past year, although new contracts for platform I'd slowed during the last three weeks of the quarter due to Cook at night team signed 30, new platform, Eddie subscriptions to new or existing customers. The total annual contract value of $181000 during the quarter.
This brings our total tougher by the subscriptions as of March 30, Onest 2020 to 273, the annual contract value of just under $2.1 billion as compared to 255 subscriptions as of December 30, Onest 2019, good annual contract value of $2.033 million.
Revenue from our access where our business increased 1% compared to the same period of the prior year as Brian mentioned other than the impact of the investment commentary business Accesswire revenue increased 36% compared to the first quarter 2019.
Primarily due to an increase in private customers.
These increases were partially offset by declines in revenue from our webcast and conference management software due to the cancellation and delay of in person events as a result of the code the 19 outbreak.
Additionally, we continue to experience a decline in revenue from our shareholder outreach offering just typically tied in with contracts avaira.
As a percentage of overall revenue platform technology revenue increased to 67% of total revenue for the three months ended March 30, Onest 2020, compared to 64% for the same period of 2019.
Services revenue decreased $183000 or 12% for the first quarter of 2020 as compared to the same period of 2019.
Decrease was partially due to a decrease in revenue from our transfer agent services due to a decline in corporate transactions directives and actions as well as temporary delays and bank of broker processing due to cope with 19.
Expect us to be a temporary delay revenues to return to normal as banks or brokers adaptive processing electronically.
Revenue from Britain proxy fulfillment services also declined due to a large onetime project in the first quarter of 2019 that was not repeated this year.
Revenue from HRS services also continues to decline.
These decreases were partially offset by an increase in webcasting services revenue due to an increase in teleconference events as customers began to hold more virtual meetings as a result of the coven 19 outbreak.
Switching gears to gross margin or total gross margin for the first quarter of 2020 was $2.763 million for 69% of revenue compared to $2.877 million also 69% of revenue during the first quarter of 2019.
Four of and technology gross margin percentage was 74% during the first quarter of 2020 as compared to 75% for the same period of the prior year.
The decrease in gross margin percentage is primarily related to additional distribution an editorial costs related to expanding the capabilities of our newswire business, coupled with the loss of the investment commentary business.
It was $248000 as compared to $147000 during the chain period of the per year.
Increasing operating income despite the decreasing gross margin is a result of lower operating expenses.
General and administrative expenses decrease $145000 or letter per se due to a decrease in bed that expense.
Decreasing acquisition related expenses of acquiring B.W.P., which were occurred during the first quarter a 2019.
Product development expenses decreased $143000, 42% due to a decrease in headcount.
Partially offsetting decreases but an increase in sales and marketing costs, which increased $76000 or 9% during the three months and there's March 31st 2020.
Into the same for you to the prior here due to an increase investment in our sales team.
On a gap basis regenerated net income a $226000 or six cents per lives a chair for the first quarter of 2020 compared to $205000 were five cents per the chair during the same period of 2019.
Looking at Salon got metrics first quarter 2020, even a increased 11% to $622000 for 15% of revenue compared to $558000 for 13% of revenue during the first quarter of 2019.
Nongovernment income for the first quarter of 2020 was $397000 for 10 cents per diluted chair compared to $518000 for a 13 cents per the chaired by the first quarter of 2019.
Moving to the Balanchine cash flow statement, we continue to generate positive cash flows from operations regenerated an additional $602000 during the first quarter of 2020.
12 per cent increase over $536000 generated in the first quarter of 2019.
The balance sheet or different rubbed, new balance increase for $1.812 million, so $1.879 million as of March 31st 2020.
Overall, despite the challenges we are currently facing I believe this year directors in relatively good position.
Continuing to evolve our products in order to adapt to the changing needs of our customers had a straw balance sheet that goes through these difficult time.
Breindel now talk brother about some of the updates we have made toward products and what lies ahead finish your direct.
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Thank you Steve is your Highland it'd be in a decent quarter, given the circumstances and our leisure focused on what we need to do this quarter and the remaining part of the year.
Last quarter, we spoke about organic growth and 2020 and it has not changed perhaps what has changed is more customers are in need of today.
Thing, we'll talk more about in a few minutes.
As I mentioned at the opening of the call our 80 plus employees essentially in remote since March insisting our customers and delivering every step in some way impact and as Steve mentioned doing a great job and also not dimension learning new products as we've pivoted some of our businesses tourism virtual event.
On a year earlier basis, our customer can continue to show strong signs of growth in combination.
More so when our private company business, where customers, where I'm, 69% from 764 to 1200 and 89 year over year.
Our public company customers during the quarter, essentially flat and 14 73 for the corner.
14, 82 last year.
Last quarter, we talked about our digital strategy and the investment in focus here is customer growth is being driven by the Sanford both in a direct and agency mom.
Since may very well it'd be the largest single customer can jump that we've had in our history to 69% you every year.
Keep in mind. The majority of these private customers are all buying news wire services today, our goal in the coming here and then do next year is to build by or partner with the Jason cease to expand customer spend improve sticking his thing produce possible feature.
We see the business longterm continuing to ground revenues expand both until but also as a per customer as we find unsuccessfully integrate these Jason t.'s.
Having a clean capital structure and fantastic Balaji puts us in a good position here today.
Our public company businesses, where we saw some lumpiness as we approached this quarter in in the next.
As one would expect the capital markets could tighten up here in the coming months, making it difficult for very small public companies to raise capital or find favorable debt instruments to execute their business models.
At least for Q1, having virtually flat customer kind of your every year is not concerning to us as we have had several projects and delays due to decisions out of our control many of those and many of those which ran new meetings and projects that are occurring in Q2 for us.
However, this is not an indicator if anything other than what it is we have headquarters like this people are where revenues and customer who one quarter to quarter. My point is here things are consistent for us today. The caveat is the capital markets and we all see how that will unfold over the next several months. This is why into private in growing newswire businesses, So vitally important to us.
Company.
Would that let's talk what we did coming out of coupon essentially building and taking to market to new products. That's a good amount of demand today.
One is our virtual lane and meetings solution a combination of our annual meeting proxy business as well as our webcasting platform merged together to create a virtual annual experience for both our customers and their shareholders.
Obviously, there is no physical annual meetings happening anytime soon.
As well timed occurrence for us we have discipline in both car components that are required to host a virtual meeting.
Thankfully, we did this and it's safe to assume that all physical union meetings from March at least to the end of the year will be canceled.
Given the fact that this is new for US we have to be realistic training internal staff ramping up sales teams onboarding and delivering.
We have a high expectations for success, we just don't have a handle on what success isn't one thing is certain the virtual in your meeting prior to the right time right place product for us and will absolutely lead to customer gross revenue expansion and profitability in something we truly believe at this point will be a product for us in the coming years.
In terms of economic and depending on the Sweetest solution selected customers are <unk> subscribing in the range of 3000 to $9000, which is generally earn during the period of the meeting.
Which means we should expect to see all revenues from virtually new meetings that happened before June 30th show up in revenues for us and keep too.
Second was our conference opera business, and finding a way to move it virtually.
Just like physical and your meetings all investor conferences for several months beginning of March had been cancelled.
We have events under contract is far out as October.
All are going virtual and over until they permanently.
This meant in order to be competitive in the business, we had to adapt and do it quickly. The first thing we did was integrate or audio video and screens rating technologies into our conference platform. So we could mimic the same physical attributes of a physical meeting see here and share.
You all know what I'm, referring to the day the conference you have an agenda.
Tells you what room to go to what table and what time you need to meet your individual we had to take that concept and make it virtual without losing the engagement factor like many conferences did with traditional phone lines early and Q1.
It has to be effortless and had to be perfect Afterall no. One else has detecting the conference business and there's never been a virtual conference where there's been so many companies presenting with one on ones all at the same time from one platform.
[noise] fast forward to today, we have now done there's two events just like.
We have hosted hundreds of meetings and presentations with thousands of investors perfectly.
Now we have our eyes that improving to the market do we have the tech the team and the capability to do this even more than we already have.
Yes. This means reselling the same banks and conference organizers of our platform for many of the same events that we had physically ever since cancelled or delayed simply rebuilding the pipeline all things considered a great position to be.
Coming in the next couple of weeks, we will be releasing some of the new wins along with their event schedules, we could not be more excited about having this advancement in an arsenal. We see this platform coming to life for both dealing onto the road shows as well as animals days and many other events that investors and issuers interact together.
A hot topic for our shareholders and moving on is to talk about access point I would like to spend a few minutes discussing the points here. During the quarter ended March 30th we did not see a slow down and lack of customer activity as T. just mentioned absent over last quarter comparison to commentary access my revenues were up 36% customers and equally impressive.
We discussed a couple of minutes ago.
I digital strategy is working and we're not even fully deployed in this effort. We feel confident that accesswire has a compelling story to the communication space, both an I.R.M.P.R. and like many of you have come to expect we're making headways and distribution every single court, we're happy to announce to drop Street Smart and edge platform went live during Q1 the first.
Step in full swap distribution.
<unk>, we have obtained in the past, we expect us to take some time to be fully integrated with the entire schwab system.
[noise] again or newswire has the right time right place product during uncertain economic times companies naturally looked for better deals equal services and consolidations a model has been about that for years, we feel like we have a viable news offering to compete with anyone we had better tech and we now have a great editorial compliance team, but strength that we feel like we could.
Place the incumbent.
Closing I want to think everyone from listening to today's call clearly see that there could be some challenges ahead of us for the public markets and as such like everyone else, we stand to lose a meaningful amount of our small microphone, okay customers to either economic impacts emanating or some other anomaly.
They won't go dark for a period of time. This is a risk known by Alice investors unemployed.
However, when I will tell you is high Steve and the rest of the team feel good about our platform our ability to pivot and to stay AD Ya I love to granted we had the Bachelor battled for customers and when a good percentage of the time.
And if we're going to lose made the competitive feel our presence by pricing them down.
We have a leading newswire that games customers virtually every day, we have a web cast platform and conference Park that has plentiful demand and opportunities ahead, he's or the here and then now and not forgotten as our entire ecosystem for when issue is can once again focus on strategic decisions, our entire platform, where he product offerings will be there for them when they're ready.
We enjoyed spending time with you reporting on our operating results the business and what we've been up to the last several weeks, we look forward to your questions and visiting with you again soon.
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Thank you.
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My first question comes from Micron Dal with North on Securities. Please proceed with your question.
[noise] you guys. Congrats on the color. This is blue corn on the call. Her Mike just say that question any update on sales force as far as hires or productivity.
And look how are ya.
Good.
Yeah. We we we have held our sales team <unk> that I will tell you that with slightly slowed down a little bit as a key hires that we intended to continue to make sure. Our sales organization. We've got a team that's delivering today, what we're going to work for the next quarter or two before we resume somewhere strategic hires in the field, but today I think.
Where we're at the capacity of which we ended you know our sales and marketing <unk> you know sit today with a total of 24 pecan sales and nine and marketing now so I think are good I upright but.
Okay Awesome. Thanks, and then how does the private or public company funnel for new business look looks like you guys had a lot a lot of added private companies are in the core.
Yeah, we we had good success I mean, we talked about this the last couple of Carter as we are moving our private company practice business to tough rather than an outback call tomorrow of a digital marketing campaign, and where about probably 50, 60% of the way ended that campaign national pipeline look strong as I indicated a few minutes ago.
Niccolite Activations are happening daily now the average price per release begins to increasing continues to do so so we feel confident about that are competitive landscape hasn't changed we still have the same viable competitors that we go up against we're not seeing any changes in that market. So we're going to continue to.
To increase to span and increased the activities in our digital presence to be able to drive in band leads and then to our point as we continue to build that critical mass is to find additional product adjacent use that we could be getting cross selling those customers to to really make them more sticking into our platform.
Okay Awesome and then just one last one here I don't know if you're a touch on this but is there any new distribution partners for extra swier.
Yeah, there's a handful <unk> some of which are not as material as something to the coveted Schwabs and Merrill Lynch is that people like to talk about you know our our thoughts are are to fall, we are not going to stop and our pursuit of gaining every bit of distribution that we can adding the street smart ass platform or Schwab is evidence of that much.
We did several quarters ago with the T.D. Ameritech platform I think are <unk>.
Then we went out tail end to the rest of the platform.
We're going to continue to do that I I will tell you. However from my private companies tend to grow some of those distribution points are at this critical for them for obvious reasons and then secondarily as.
They kept companies tend and large cap companies tend to look for different options right for for for budgetary reasons are just for contract expiration. There are now coming to a seeking our distribution platform and less and less or the shrubs and the merits even talked about so we feel again right time by place, although that doesn't mean that we're going to stop or slow down.
We're going to continue that pursued and feel confident that Paul schwab and and merril or be fully done by the end in here.
Yeah. Thanks, guys. That's it for me, but I have a go on.
Thank you look back foot.
As a reminder, if you'd like to ask the question. Please press star one on your telephone keypad. One moment. Please why we polled for questions.
No further questions at this time at this point I'd like to turn the call back over to Brian Bell Barney for closing comments.
Well. Thank you, it's always <unk> tough day, and the earnings business, a Amazon Apple on a bunch of others I Miss reporting day thinking to everyone, who took the time to visit with us and listen to the days call. It Steven I. We look forward to speaking with you again and in the meantime stay safe and take care.
Guess concludes today's conference you may disconnect you launch at this time and we thank you for your participation.
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